Use the Following to Answer Questions

question 146

Multiple Choice

Use the following to answer questions:
Figure: Monopoly Profits in Duopoly
-(Figure: Monopoly Profits in Duopoly) The figure Monopoly Profits in Duopoly shows how an industry consisting of two firms that face identical demand curves (D₁) can collude to increase profits. The market demand curve is D_2. Which of the following assumptions is part of the analysis illustrated by the model?

• A) The two firms have identical marginal cost but different average total cost.
• B) The two firms sell differentiated products.
• C) The MR curve is not relevant to either firm's choices.
• D) The firms can act as a cartel and maximize their combined economic profit.

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