Suppose Acme and Mega Produce and Sell Identical Products and Face

question 72

Multiple Choice

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Mega cheats on the agreement by reducing its price to $1 while Acme continues to comply with the collusive agreement, then Mega's economic profit will be ________.

• A)$75
• B)$100
• C)$150
• D)$200

Analyze the role of government in creating or mitigating monopolistic markets through policies such as patents and franchises.

Learn about price discrimination and pricing strategies across different markets.

Understand the economics of innovation and how patent policies can influence industry location decisions.

Understand the concept of marginal revenue and how it plays a role in monopolistic decision-making processes.

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Definitions:

Residual Standard Deviation

A measure of the amount by which an observation differs from its expected value, specifically in the context of a regression model.

Beta

A measure of a stock's volatility in relation to the overall market, indicating the level of risk associated with investing in the stock.

Residual Standard Deviation

A statistical measure that quantifies the amount by which an investment's returns deviate from its expected benchmark performance.