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Suppose There Are Only Two Firms in an Industry,and Their

Question 68

Multiple Choice

Suppose there are only two firms in an industry,and their products are perfect substitutes for each other.Each firm had a fixed marginal cost of $5,and zero fixed cost of operation.The highest the consumers of this product are willing to pay for it is $10,and there are 200 consumers in this market.The two firms agree to collude and come up with a pricing scheme that maximizes their joint profit.The agreed-on price of this collusion will be ________,and this collusion is ________.


A) $10; unstable
B) $10; stable
C) $5; unstable
D) $9.99; stable

Correct Answer:

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