Tina's Bakery and Cliff's Cupcakes & More Participate in a Duopoly

question 57

Multiple Choice

Tina's Bakery and Cliff's Cupcakes & More participate in a duopoly and are maximizing profits by cooperating. If Tina decides to increase her production of baked goods, market price would:

• A) not change.
• B) increase.
• C) decrease.
• D) first increase and then decrease.

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Definitions:

Sales Tax

A tax on sales or on the receipts from sales, typically added to the purchase price by the seller.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Selling Expenses

Expenses that are incurred directly in the selling of merchandise.

Periodic Inventory

A system in which the inventory is physically counted at certain periods and the cost of goods sold is calculated thereafter.