*Each firm reasons that the monopoly price ($24) earns them $48 000 each (2000 tickets each). If one of them increases output by 1000, the price drops to $18 (midpoint). At 5000 tickets, the firm that drops its price earns 3000 x $18 000 = $54 000. The other firm earns
$36 000. The NE is for both firms to increase output to 3000.
-Refer to Table 16-1. Assume that there are two profit-maximising ecotourist companies operating in this market. Further assume that they are not able to collude on the price and quantity of tickets they sell. How much profit will each firm earn when this market reaches a Nash equilibrium?
A) $0
B) $26 000
C) $36 000
D) each firm will incur economic losses in a Nash equilibrium

Question

Quizplus · Accepted Answer

The Answer of *Each firm reasons that the monopoly price ($24) earns them $48 000 each (2000 tickets each). If one of them increases output by 1000, the price drops to $18 (midpoint). At 5000 tickets, the firm that drops its price earns 3000 x $18 000 = $54 000. The other firm earns
$36 000. The NE is for both firms to increase output to 3000.
-Refer to Table 16-1. Assume that there are two profit-maximising ecotourist companies operating in this market. Further assume that they are not able to collude on the price and quantity of tickets they sell. How much profit will each firm earn when this market reaches a Nash equilibrium?
A) $0
B) $26 000
C) $36 000
D) each firm will incur economic losses in a Nash equilibrium

*Each Firm Reasons That the Monopoly Price ($24) Earns Them