Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product.
Refer to the figure above.If Acme and Mega decide to collude and work as a pure monopolist such that each firm will produce half the quantity demanded by the market,what will be the economic profit for Mega?
A) $0
B) $50
C) $100
D) $150

Question

Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product. 
Refer to the figure above.If Acme and Mega decide to collude and work as a pure monopolist such that each firm will produce half the quantity demanded by the market,what will be the economic profit for Mega?
A) $0 
B) $50 
C) $100 
D) $150

Quizplus · Accepted Answer

Each firm produces 50 units and sells them for $2 each.Average cost is zero,so the profit is $100.

Suppose Acme and Mega Produce and Sell Identical Product with Zero