If a firm has a monopoly in both the production and distribution of a product and the managers of both the production and distribution divisions maximize profits, all of the following are true except which one?
A)The firm will maximize its total profit.
B)The manager of one of the divisions should be instructed to maximize profit and the manager of the other division should be instructed to operate as a perfectly competitive firm.
C)A successive monopoly will occur within the firm.
D)Double marginalization will occur within the firm.

Question

Quizplus · Accepted Answer

When both divisions maximize their own profits independently, it leads to double marginalization, reducing the firm's total profit. Therefore, the firm will not maximize its total profit.

If a Firm Has a Monopoly in Both the Production