If a duopoly has reached the monopoly outcome,a firm can increase its profit by if it and it alone ________ its price and ________ its production.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases
E) raises; does not change

Question

Quizplus · Accepted Answer

If the duopoly has reached the monopoly outcome, the two firms would have already established a high price and reduced production levels to maximize profits. Therefore, the firm can only increase its profit by lowering its price (to attract more customers) and increasing its production (to reduce average costs through economies of scale). Choice C is the only option that suggests a lower price and increased production, which aligns with the objective of increasing profits.

If a Duopoly Has Reached the Monopoly Outcome,a Firm Can