Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Acme and Mega 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 Mega cheats on the agreement by reducing its price to $1 while Acme continues to comply with the collusive agreement, then Mega will then sell ________ units and Acme will sell ________ units.
A)150; 50
B)100; 50
C)150; 0
D)100; 0

Question

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.  Suppose Acme and Mega 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 Mega cheats on the agreement by reducing its price to $1 while Acme continues to comply with the collusive agreement, then Mega will then sell ________ units and Acme will sell ________ units.
A)150; 50 
B)100; 50 
C)150; 0 
D)100; 0

Quizplus · Accepted Answer

At a price of $1, Mega will sell 150 units, and no consumers will be willing to pay $2.

Suppose Acme and Mega Produce and Sell Identical Products and Face