Suppose the market for bottled water is served by two oligopolists. If they reach an agreement to restrict production and charge a price above marginal cost, then:
A)they will earn a larger profit than a monopolist would have earned.
B)they will charge a higher price than a monopolist would have charged.
C)their agreement is likely to eventually collapse.
D)neither firm will have an incentive to cheat on the agreement since it benefits them both.

Question

Quizplus · Accepted Answer

Each firm will have an incentive to cut prices in order to capture a larger market share.

Suppose the Market for Bottled Water Is Served by Two