Ann and Bruce Each Own a Pizza Store in Frostbite

question 39

Multiple Choice

Ann and Bruce each own a pizza store in Frostbite Falls, Minnesota. Demand for pizza is given by Q = 400 2 40P. Having the only two pizza stores in Frostbite Falls, they attempt to profitably split the market without violating the Sherman Antitrust Act. Each has the cost function C = 50 + 2Q. If Ann and Bruce behave as duopolists, each earns a profit of

• A) $568.89.
• B) $497.78.
• C) $0.
• D) $234.44.
• E) $640.

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Definitions:

Free Transferability

The ability to freely transfer assets or shares from one party to another without restrictions.

Close Corporations

Corporations characterized by a limited number of shareholders, no public market for the shares, and often involving family members or close associates in the business operations.

Balance of Power

A political concept aimed at preventing any one nation or group of nations from becoming too powerful, thereby maintaining stability and preventing dominance.

Buy-and-Sell Agreement

A legally binding agreement between co-owners or shareholders that outlines the conditions under which one's interest in a business can be sold or transferred.