Hot dog vendors on the beach fail to cooperate with one another on the quantity of hot dogs they should sell to earn monopoly profits. A consequence of their failure is that, relative to the outcome the vendors would like,
(i)the quantity of hot dogs supplied is closer to the socially optimal level.
(ii)the price of hot dogs is closer to marginal cost.
(iii)the hot dog market at the beach is less competitive.
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(iii) only

Question

Quizplus · Accepted Answer

When vendors fail to cooperate, they tend to supply more than the monopoly quantity, which pushes the quantity closer to the socially optimal level and the price closer to marginal cost, making the market more competitive.

Hot Dog Vendors on the Beach Fail to Cooperate with One