Consider a duopoly with collusion.If the duopoly maximizes profit,
A)each firm will produce the same amount.
B)each firm will produce its maximum output possible.
C)industry marginal revenue will equal industry marginal cost at the level of total output.
D)industry demand will equal industry marginal cost at the level of total output.
E)none of the above.

Question

Quizplus · Accepted Answer

When firms collude in a duopoly and maximize profit, they act as a monopoly and jointly determine the level of total output. This means that industry marginal revenue will equal industry marginal cost at the level of total output, ensuring that total profit is maximized. The individual output for each firm may not be the same or at its maximum level possible, as they may allocate output based on their agreed-upon profit-sharing arrangement.

Consider a Duopoly with Collusion