Imagine a duopoly in which two firms,A and B,produce the monopoly profit-maximizing output and equally share the economic profit.If firm A increases its output,the market price ________ and total economic profit of the two firms combined ________.
A) falls; decreases
B) falls; increases
C) rises; decreases
D) rises; increases
E) falls; does not change

Question

Quizplus · Accepted Answer

If firm A increases its output, the total output in the market will increase, leading to a decrease in the market price. As both firms equally share the economic profit, the increase in firm A's output would lead to a decrease in the economic profit of both firms combined. Therefore, the correct answer is A) falls; decreases.

Imagine a Duopoly in Which Two Firms,A and B,produce the Monopoly