If a certain market were a monopoly,then the monopolist would maximize its profit by producing 1,000 units of output.If,instead,that market were a duopoly,then which of the following outcomes would be most likely if the duopolists successfully collude?
A) Each duopolist produces 1,000 units of output.
B) Each duopolist produces 600 units of output.
C) One duopolist produces 400 units of output and the other produces 600 units of output.
D) One duopolist produces 800 units of output and the other produces 400 units of output.

Question

Quizplus · Accepted Answer

If the duopolists successfully collude and act as a monopolist, they would jointly maximize their profits by producing 1,000 units of output. However, they cannot trust each other to maintain the agreed output levels, which leads to the potential for cheating and a breakdown of collusion. Therefore, the output levels will depend on the bargaining power of each duopolist. 
In this scenario, it is most likely that one duopolist will have more bargaining power than the other, resulting in an uneven split of production. The choice C, where one duopolist produces 400 units of output and the other produces 600 units of output, is the most plausible outcome when the duopolists successfully collude.

If a Certain Market Were a Monopoly,then the Monopolist Would