Use the following to answer questions:
-(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal and fixed cost of producing crude oil equals zero. Suppose that the two firms are maximizing industry profit and splitting the profit evenly. If both firms decide to cheat and produce 10 more barrels each, firm 1's profit will be _____, and firm 2's profit will be _____.
A) $3,200; $3,200
B) $3,200; $3,000
C) $3,000; $3,200
D) $3,000; $3,000

Question

Use the following to answer questions: 
-(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal and fixed cost of producing crude oil equals zero. Suppose that the two firms are maximizing industry profit and splitting the profit evenly. If both firms decide to cheat and produce 10 more barrels each, firm 1's profit will be _____, and firm 2's profit will be _____.
A) $3,200; $3,200 
B) $3,200; $3,000 
C) $3,000; $3,200 
D) $3,000; $3,000

Quizplus · Accepted Answer

If both firms cheat and produce more, the increased supply will lower the price, reducing profits for both firms to $3,000 each.

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