Suppose Acme and Mega Produce and Sell Identical Products and Face

question 32

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 while Acme continues to comply with the collusive agreement, then Mega's economic profit will be ______.

• A)$75
• B)$100
• C)$150
• D)$200

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Definitions:

Federal Income Tax Withholding

The process by which an employer deducts a portion of an employee's income and pays it directly to the government, as a prepayment of the employee's federal income tax.

Net Pay

The amount of a person's paycheck after deductions, such as taxes and retirement contributions, have been removed.

FICA Tax

A U.S. federal payroll tax known as the Federal Insurance Contributions Act tax, which finances Social Security and Medicare benefits.

Federal Income Tax

A charge imposed by the federal government of the United States on the yearly income of individuals, corporations, trusts, and various legal entities.