Figure 17-1
-Refer to Figure 17-1. Suppose this market is served by two firms who each face the marginal cost curve shown in the diagram. The marginal revenue curve that a monopolist would face in this market is also shown. If the firms are able to collude successfully,
A)the total output will be 2 units and the price will be $6.00 per unit.
B)the total output will be 2 units and the price will be $8.00 per unit.
C)the total output will be 4 units and the price will be $6.00 per unit.
D)there will be no deadweight loss.

Question

Figure 17-1 
-Refer to Figure 17-1. Suppose this market is served by two firms who each face the marginal cost curve shown in the diagram. The marginal revenue curve that a monopolist would face in this market is also shown. If the firms are able to collude successfully,
A)the total output will be 2 units and the price will be $6.00 per unit. 
B)the total output will be 2 units and the price will be $8.00 per unit. 
C)the total output will be 4 units and the price will be $6.00 per unit. 
D)there will be no deadweight loss.

Quizplus · Accepted Answer

If the firms are able to collude successfully, they would act as a monopoly and produce where their combined marginal cost is equal to the marginal revenue. In this case, that would be at a quantity of 2 units and a price of $8.00 per unit. This is shown by the intersection of the combined marginal cost curve (which is the sum of the two individual marginal cost curves) and the marginal revenue curve for a monopolist. At this price and quantity, there would be no deadweight loss, as the monopolist would produce the efficient quantity.

Figure 17-1 -Refer to Figure 17-1. Suppose This Market Is Served by Is