Table 17-9
Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost.

-Refer to Table 17-9.Acme and Pinnacle agree to jointly maximize profits.If Acme and Pinnacle each break the agreement and each produce 100 more than agreed upon,how much less profit does each make?
A) $250
B) $750
C) $1,000
D) $2,000

Question

Table 17-9
Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost.
 
-Refer to Table 17-9.Acme and Pinnacle agree to jointly maximize profits.If Acme and Pinnacle each break the agreement and each produce 100 more than agreed upon,how much less profit does each make?
A) $250 
B) $750 
C) $1,000 
D) $2,000

Quizplus · Accepted Answer

If both Acme and Pinnacle produce 100 more units than agreed upon, they will flood the market, leading to a decrease in price and thus a decrease in profit. The problem states that each makes $1,000 less profit when they break the agreement and produce more.

Table 17-9 Only Two Firms, Acme and Pinnacle, Sell a Particular Product