Two Firms That Comprise an Industry Have Decided to Engage

Multiple Choice

Two firms that comprise an industry have decided to engage in collusion. They intend to maximize their total collective profit, that is, to behave as a single monopolist. How should they behave?

A) Both firms should increase their levels of output.
B) The firm with the higher marginal cost should reduce output and the firm with the lower marginal cost should increase output.
C) The firm with the lower marginal cost should reduce output and the firm with the higher marginal cost should increase output.
D) Both firms should reduce their levels of output.