Suppose Acme and Mega Produce and Sell Identical Products and Face

question 25

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 and Acme matches the price cut, then if consumers are evenly split between the two firms, Acme's economic profit will be ________.

• A)$75
• B)$100
• C)$150
• D)$200

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Definitions:

MRP

Stands for Materials Requirement Planning, a system used to manage manufacturing processes by calculating materials, components, and schedule needed for production.

MRP

Material Requirements Planning is a method used to determine the materials and parts required for product production.

Work Centre

A specific location where particular tasks or operations are carried out within a manufacturing process or factory.