An effective and enforceable collusion in a duopoly will result in:
A)a monopoly price and output in the market.
B)a perfectly competitive outcome.
C)an inefficient equilibrium.
D)a large consumer surplus.

Question

Quizplus · Accepted Answer

Collusion in a duopoly occurs when the two firms in the market agree to restrict output and raise prices, resulting in a monopoly-like outcome. This allows them to maximize profits and maintain their market power. Therefore, the best choice is A, which states that an effective and enforceable collusion in a duopoly will result in a monopoly price and output in the market. B is incorrect because a perfectly competitive outcome would require the absence of collusion. C is also incorrect because an inefficient equilibrium would result from competition rather than collusion. D is not necessarily true because a monopoly price and output may result in a decrease in consumer surplus.

An Effective and Enforceable Collusion in a Duopoly Will Result