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Lemur [1.5K]
2 years ago
12

Firms A and B plan to collude in an economy for their similar​ products, which includes the grim strategy for punishment. They p

lan to set the price of their product at​ $8. The marginal cost of Firm A is​ $5 and Firm B is​ $4.50. If firm A is impatient to earn more profits and Firm B wishes to last in the business for the​ long-run, which of the following situations would likely​ occur? A. Firm B reduces the price to​ $7 causing Firm A to exit the market. B. Firm B reduces the price to​ $7 causing Firm A to reduce its price to​ $7. C. Firm A reduces the price to​ $7 causing Firm B to reduce its price to​ $4.50. D. Firm A reduces the price to​ $7 causing Firm B to exit the market.
Business
1 answer:
denis-greek [22]2 years ago
3 0

Answer: C. Firm A reduces the price to​ $7 causing Firm B to reduce its price to​ $4.50.

Explanation:

Since firm A is impatient to earn more profits and Firm B wishes to last in the business for the​ long-run, then Firm A will reduce the price to​ $7 causing Firm B to reduce its price to​ $4.50.

Since Firm A reduces the price to​ $7, this will lead to an increase in the quantity demanded of the product and therefore the firm can earn more profit. On the other hand, firm B will reduce its price to a point where the price meets the marginal cost which is $4.50.

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Time Remaining 1 minute 56 seconds00:01:56 Item 1Item 1 Time Remaining 1 minute 56 seconds00:01:56 You Save Bank has a unique ac
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Future value = 16007.81437

Explanation:

we have to compound all the rates for the time period together as the 7,750 as exposed to this rate and their interest generated in one period are taking into consideration for the subsequent period interest calculations.

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