The figure given below represents two monopolists James and Jerry.James produces Good A using the input Good B which is produced by Jerry and has no other variable costs.James is the only consumer of Good B, and the marginal cost incurred by Jerry to produce Good B is zero.DA and DB represent the demand curves for Good A and Good B respectively.MRA and MRB represent the marginal revenue received from Good A and Good B respectively.It takes one unit of A to produce a unit of B.

-Refer to Figure.What would be the combined profit earned by the two monopolists if they agree to merge?
A)$48
B)$24
C)$12
D)$36

Question

The figure given below represents two monopolists James and Jerry.James produces Good A using the input Good B which is produced by Jerry and has no other variable costs.James is the only consumer of Good B, and the marginal cost incurred by Jerry to produce Good B is zero.DA and DB represent the demand curves for Good A and Good B respectively.MRA and MRB represent the marginal revenue received from Good A and Good B respectively.It takes one unit of A to produce a unit of B.

-Refer to Figure.What would be the combined profit earned by the two monopolists if they agree to merge?

-Refer to Figure.What would be the combined profit earned by the two monopolists if they agree to merge?
A)$48 
B)$24 
C)$12 
D)$36

Quizplus · Accepted Answer

When two monopolists merge, they can maximize their combined profits by acting as a single monopolist. The combined profit is the area between the merged firm's marginal cost curve and the market demand curve, up to the quantity where marginal cost equals marginal revenue. Without the specific figure, a general explanation is that the merged entity would reduce output to the level where the merged entity's marginal revenue equals its marginal cost, thereby increasing the price and maximizing combined profits. The correct answer, based on the options provided and assuming the figure supports this, would be the highest profit level indicated, which is $48.

The Figure Given Below Represents Two Monopolists James and Jerry