Use the following to answer question:
-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets with no marginal cost or fixed cost.If these two producers formed a cartel,split the production of output equally,and acted to maximize total industry profits,each firm's output would be _____,and each firm's profit would be _____.
A)500;$2,500
B)250;$1,250
C)1,000;$500
D)1,000;$10,000

Question

Use the following to answer question: 
-(Table: Demand Schedule of Gadgets)Use Table: Demand Schedule of Gadgets.The market for gadgets consists of two producers,Margaret and Ray.Each firm can produce gadgets with no marginal cost or fixed cost.If these two producers formed a cartel,split the production of output equally,and acted to maximize total industry profits,each firm's output would be _____,and each firm's profit would be _____.
A)500;$2,500 
B)250;$1,250 
C)1,000;$500 
D)1,000;$10,000

Quizplus · Accepted Answer

To maximize total industry profits, the two firms would need to act as a monopoly and produce where MR=MC. At a price of $5, this occurs at a quantity of 500 gadgets. Splitting the production equally between the two firms means each firm would produce 250 gadgets. Each firm's profit would be (price - average total cost) x quantity, or ($5 - $0) x 250 = $1,250.

Use the Following to Answer Question