Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 while Pushy Sales continues to comply with the collusive agreement, then Quick Buck's economic profit will be ________.
A)$6,000
B)$4,000
C)$2,000
D)$3,000

Question

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.  Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 while Pushy Sales continues to comply with the collusive agreement, then Quick Buck's economic profit will be ________.
A)$6,000 
B)$4,000 
C)$2,000 
D)$3,000

Quizplus · Accepted Answer

When price is $1, there are 3,000 units sold, and profit is $3,000 because average cost is zero.

Quick Buck and Pushy Sales Produce and Sell Identical Products