Suppose that Jay-Z and Beyonce are duopolists in the music industry.In January,they agree to work together as a monopolist,charging the monopoly price for their music and producing the monopoly quantity of songs.By February,each singer is considering breaking the agreement.What would you expect to happen next?
A) Jay-Z and Beyonce will determine that it is in each singer's best self interest to maintain the agreement.
B) Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price will decrease.
C) Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will decrease, and the new equilibrium price will increase.
D) Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

Question

Quizplus · Accepted Answer

Once one singer breaks the agreement and begins to produce more songs, the other singer will also likely break the agreement in order to compete effectively. This will increase the overall quantity of songs produced by the two and decrease the price. This outcome is expected in a duopoly market where firms have an incentive to gain a larger market share by increasing quantity or decreasing price.

Suppose That Jay-Z and Beyonce Are Duopolists in the Music