Reference: 11110
-(Exhibit: Monopoly Through Collusion) For this question assume that the duopoly industry illustrated in the exhibit produces a perishable gooD.If each firm acted on the belief that it faced demand curve D₂ and acted without consideration of the other firm's behavior, the market price would likely end up being _______ and the combined economic profits of the firms would be _______ .

Question

Reference: 11110

-(Exhibit: Monopoly Through Collusion) For this question assume that the duopoly industry illustrated in the exhibit produces a perishable gooD.If each firm acted on the belief that it faced demand curve D₂ and acted without consideration of the other firm's behavior, the market price would likely end up being _______ and the combined economic profits of the firms would be _______ .

Quizplus · Accepted Answer

If each firm acts without considering the other's behavior, they will both act as monopolists, leading to a price of P₁ and economic profits of zero. This is because any attempt by one firm to increase output will lower the price and reduce their profits, so neither firm has an incentive to deviate from their monopoly output level.

Reference: 11110 -(Exhibit: Monopoly Through Collusion)For This Question Assume That the Duopoly