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:

Physical Proximity

The closeness or distance between two or more entities, influencing interactions and relationships.

Power Corrupts

The tendency for individuals in positions of authority to engage in unethical or morally questionable actions due to their increased power or control.

Authority Structure

The organization of authority and power within a group, institution, or society, which outlines the hierarchy and roles of its members.

Hierarchical

characterizes systems or organizations structured in levels of rank or authority, where higher levels have control over the lower ones.