Firms in a duopoly industry could achieve the maximum combined profit possible if they colluded.

Question

Quizplus · Accepted Answer

When two firms operate in a duopoly industry, they are likely to produce a quantity of output where the marginal cost of production is equal to marginal revenue. However, if the two firms collude, they can agree to limit their output and charge a higher price, leading to a higher profit for both firms. This scenario can result in the maximum combined profit possible for the two firms.

Firms in a Duopoly Industry Could Achieve the Maximum Combined