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 and Pushy Sales matches the price cut, then if consumers are evenly split between the two firms, what will be Quick Buck's economic profit?
A)$1,000
B)$1,500
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 and Pushy Sales matches the price cut, then if consumers are evenly split between the two firms, what will be Quick Buck's economic profit?
A)$1,000 
B)$1,500 
C)$2,000 
D)$3,000

Quizplus · Accepted Answer

When price is $1, there are 3,000 units sold, and each firm will earn a profit of $1,500.

Quick Buck and Pushy Sales Produce and Sell Identical Products