There Are Two Firms in the Blastopheme Industry

question 28

Multiple Choice

There are two firms in the blastopheme industry. The demand curve for blastophemes is given by p = 4,500 - 4q. Each firm has one manufacturing plant and each firm i has a cost function C(q_i) = q²_i, where q_i is the output of firm i. The two firms form a cartel and arrange to split total industry profits equally. Under this cartel arrangement, they will maximize joint profits if

• A) they produce a total of 375 units, no matter which firm produces them.
• B) and only if each firm produces 250 units in its plant.
• C) and only if they each produce a total of 562.50 units.
• D) they produce a total of 500 units, no matter which firm produces them.
• E) they shut down one of the two plants, having the other operate as a monopoly and splitting the profits.

---

Definitions:

Legally Responsible

The obligation to answer for an act or omission in a legal or regulatory context, potentially leading to civil or criminal penalties.

Trade Dress

The visual appearance of a product or its packaging that signifies the source of the product to consumers.

Visual Appearance

Refers to the way objects are perceived in terms of their aesthetic aspects, including color, shape, and size.

Cryptocurrency

A digital or virtual currency that uses cryptography for security and operates independently of a central bank.