Suppose Two Firms Produce Close Substitutes Such That Reducing the Price

question 39

Multiple Choice

Suppose two firms produce close substitutes such that reducing the price of one product reduces the quantity demanded of the other. If those two firms merge

• A) they can earn higher profits by continuing to sell both products if the profit gained from increased sales of one product are greater than the lost profits from reduced sales of the other product.
• B) they will eliminate the less profitable product and sell only one.
• C) they will raise prices on both products.
• D) they will be unable to earn higher profits because the two products will compete against each other.

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Definitions:

REM Sleep

A unique phase of sleep characterized by rapid eye movements, low muscle tone, and vivid dreams, playing a key role in emotional regulation and memory.

Vivid Dreams

Highly detailed, clear, and sometimes intensely emotional dreams that are remembered upon awakening.

Pain Receptors

Specialized nerve endings that transmit pain signals to the brain when the body experiences harmful stimuli.

Emotional Reactions

Responses characterized by intense feelings that are generated in response to an internal or external event.