Figure 8.8
-Figure 8.8 shows demand, marginal revenue, and costs of a duopolist. If the two duopolists have the same costs and split the market equally, each profit maximizing duopolist will earn a profit of ________.

Question

Quizplus · Accepted Answer

The profit maximizing output quantity for each duopolist is where marginal cost intersects with marginal revenue, which is at a quantity of 20 in this case. At this quantity, the price is $30,000, and the average total cost is $20,000, so each duopolist earns a profit of $10,000 ($30,000 - $20,000 = $10,000). Therefore, if the two duopolists split the market equally, each one would earn a profit of $10,000.

Figure 8.8 -Figure 8.8 Shows Demand, Marginal Revenue, and Costs of a of a Duopolist