There are only two firms in an industry with demand curves q1 = 30 - P and q2 = 30 - P. Both have no fixed costs and each has a marginal cost of 10 per unit produced. If they behave as profit-maximizing price takers, each produces 20 units and sells them at a price of 10 so that each firm makes zero economic profits. Suppose the two firms form a cartel. While firm 1 produces one-half of the profit-maximizing cartel output, firm 2 cheats and produces 5 units more. What would happen to the two firms' economic profits?
A) Firm 1's profits remain the same, but firm 2's profits increase by 10.5
B) Firm 1's profits decrease by 5.5, but firm 2's profits increase by 11.
C) Firm 1's profits decrease by 25, but firm 2's profits increase by 12.5.
D) Firm 1's profits decrease by 12.5, but firm 2's profits increase by 25.
Question 2
In the short run, the competitive firm will hire more labor if
A) the wage rate increases.
B) the price the firm receives for the output increases.
C) the price the firm receives for the output decreases.
D) a specific tax is imposed on the output.
J. P. Morgan, the financial genius, staved off ruinous competition among steel firms by combining mo
Attention and memory are in demand during circle time.
Perfect logistic curves
Industry is responsible for 21% of global greenhouse gas emissions
Wages and Machines in the Textile Industry, 1910
Competitive firms and maximization