There are only two driveway paving companies in a small town, Asphalt Inc. and Blacktop Bros. The inverse demand curve for paving services is P = 1,600 - 20Q, where quantity is measured in the number of pave jobs per month and price is measured in dollars per job. The two firms have an identical marginal cost of $400 per driveway. a. If the two firms collude and act like a monopoly, splitting the work and profits evenly, how many driveways will each firm pave and at what price? How much profit will each firm make? b. Does Asphalt Inc. have an incentive to cheat by paving one more driveway each month? c. Suppose each firm decides to pave one more driveway each month. Does Asphalt Inc. have an incentive to cheat?

Activity-based costing (abc) is not truly a cost collection mechanism as much as it is an inventory valuation method. the main purpose for implementing an activity-based cost system is to try to overcome some of the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. however, one of the disadvantages of utilizing abc is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with resource or financial constraints. with this in mind, what kinds of industries or companies do you think would benefit most from using activity-based costing and why? in designing or modifying an accounting system to capture appropriate costs for abc, what considerations do you think would need to be made?