Two duopoly firms form a cartel. They decide to collude and fix the price of their good. Each individual firm will earn the highest profit if
A) it cheats and the other sticks with the agreement.
B) both stick with the agreement.
C) it sticks with the agreement and the other cheats.
D) they both cheat.
A
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The maximum profit for a single-price monopoly is found when the firm produces the level of output so that
A) marginal revenue equals marginal cost. B) price equals marginal cost. C) it can charge the highest possible price. D) marginal revenue exceeds marginal cost by as much as possible. E) total revenue equals total cost.
An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in
A) an increase in the equilibrium price of peanuts and no change in the equilibrium quantity. B) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease. C) an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease. D) an increase in the equilibrium quantity of peanuts and no change in the equilibrium price.