Multiple Choice
Use the information below to answer the following questions.
Fact 15.2.1
Two firms, FastNet and SmartCast are the only Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other firm's service. The industry is a natural duopoly. FastNet and SmartCast decide to collude and agree to share the market equally.
-Refer to Fact 15.2.1. What is the result if both firms cheat on the agreement?
A) Both firms make an economic profit that is less than if they had both complied with the agreement.
B) Economic profit of both firms is maximized.
C) Both firms are playing a game of chicken.
D) Only one firm is playing a game of chicken.
E) Market output decreases.
Correct Answer:
Verified
Correct Answer:
Verified
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