Scenario: There Are Two Firms in an Industry, Firm a and Firm

question 199

Multiple Choice

Scenario: There are two firms in an industry, Firm A and Firm B, and they consider entering into a colluding agreement. If the two firms collude, then they agree that they would both produce less than what they would if they were competing against each other in an oligopolistic market. Since Firm A expects Firm B to produce a small quantity of output in the colloding agreement, Firm A is facing a demand curve with the same slope but with a higher intercept. The following figure depicts demands that face Firm A in both the colluding agreement and the oligopolistic market.

-Refer to the scenario above.If the two firms agree that they both should produce 1 unit,what is the profit each firms gets?

• A) $2.50
• B) $3.50
• C) $7.50
• D) $8.50

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Definitions:

S Phase

Stage in interphase of the cell cycle during which DNA and other chromosomal constituents are synthesized. Compare with G1 phase and G2 phase.

Metaphase

A stage of cell division where chromosomes line up at the cell's equator before being separated into each of the two new cells.

Prophase

The first stage of cell division in both mitosis and meiosis, characterized by the condensation of the chromatin and the formation of the mitotic spindle.

Meiosis

A form of cell division in sexually reproducing organisms that reduces the chromosome number by half, producing four haploid cells, each genetically distinct from the parent cell that gave rise to them.