Consider an industry with two firms producing similar products. Each firm's total cost (in dollars)is given below. Acme Manufacturing: TC = 100 + 3Q
Generic Industries: TC = 500 + 3Q
Suppose that Acme and Generic face the same demand curve. If each firm produces its profit-maximizing level of output and earns a positive economic profit, then which of the following statements is true?
A)Acme will produce more output than Generic.
B)Generic will produce more output than Acme.
C)Acme and Generic will produce the same quantity and will have the same profits.
D)Acme and Generic will produce the same quantity, but Acme will have higher profits.

Question

Quizplus · Accepted Answer

If both firms face the same demand curve and have the same marginal cost, then they will choose the same profit-maximizing output, but Acme will earn a higher profit because its total cost is lower.

Consider an Industry with Two Firms Producing Similar Products