If an Industry Consisting of Two Firms Produces a Total

question 161

Multiple Choice

If an industry consisting of two firms produces a total of 12 units, the market price is $10. If 13 units are produced, the price falls to $9. Suppose the two firms form a cartel and agree to produce 6 units each. If one firm cheats and produces 7 units, the cheating firm's revenue rises by _____ and the noncheating firm's revenue falls by _____.

• A) $3; $6
• B) $3; $12
• C) $6; $6
• D) $6; $12

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Definitions:

Nuisance

An act, condition, or thing causing inconvenience or damage to others, often relating to the use of property.

Professional Liability

The legal responsibility professionals have to compensate for losses due to errors or omissions in their services.

Negligence

A legal concept involving a failure to take reasonable care to avoid causing injury or loss to another person, leading to liability for damages.

Dry-Cleaning Plant

A facility equipped to clean clothing, textiles, and other goods using chemical solvents rather than water, and typically involves specialized equipment.