Figure: Monopoly Profits in Duopoly (Figure: Monopoly Profits in Duopoly) The figure Monopoly Profits in Duopoly illustrates the situation in which an industry consisting two firms that face identical demand curves (D1) can collude to increase profits.If the firms collude and agree to share the market demand equally, then each firm will act as if its demand curve is given by , while the market demand
Curve is given by _.

Question

Figure: Monopoly Profits in Duopoly   (Figure: Monopoly Profits in Duopoly) The figure Monopoly Profits in Duopoly illustrates the situation in which an industry consisting two firms that face identical demand curves (D1) can collude to increase profits.If the firms collude and agree to share the market demand equally, then each firm will act as if its demand curve is given by , while the market demand
Curve is given by _.

Quizplus · Accepted Answer

The figure shows that when the two firms collude and agree to share the market equally, their total profits are maximized. In this situation, each firm acts as a monopolist facing a demand curve that is half of the market demand curve (D1). Therefore, the answer is C, which shows that each firm's demand curve is D1 and the market demand curve is D2.