Figure: Monopoly Profits in Duopoly (Figure: Monopoly Profits in Duopoly) Suppose the duopoly industry illustrated in the figure Monopoly Profits in Duopoly produces a perishable good.If the industry were perfectly competitive, the market price would likely end up being , and the combined economic
Profits of the firms would be _.

Question

Figure: Monopoly Profits in Duopoly   (Figure: Monopoly Profits in Duopoly) Suppose the duopoly industry illustrated in the figure Monopoly Profits in Duopoly produces a perishable good.If the industry were perfectly competitive, the market price would likely end up being , and the combined economic
Profits of the firms would be _.

Quizplus · Accepted Answer

In a perfectly competitive market, the price is determined by the intersection of supply and demand curves. In this case, the intersection is at price P₁. The economic profits of each firm would be zero because in the long run, firms would enter or exit the market until the price is equal to the minimum average total cost of production.