Use the following to answer question(s): Monopoly Through Collusion

-(Exhibit: Monopoly Through Collusion) Given the duopoly industry illustrated in the exhibit, if each firm acted on the belief that it faced demand curve D₂ and acted without consideration of the other, each firm would attempt to maximize economic profits by producing quantity _______ and setting price equal to _______ .
A) Q₄; P₁
B) Q₄; P₂
C) Q₁; P3
D) Q₂; P₂

Question

Use the following to answer question(s): Monopoly Through Collusion
 
-(Exhibit: Monopoly Through Collusion) Given the duopoly industry illustrated in the exhibit, if each firm acted on the belief that it faced demand curve D₂ and acted without consideration of the other, each firm would attempt to maximize economic profits by producing quantity _______ and setting price equal to _______ .
A) Q₄; P₁ 
B) Q₄; P₂ 
C) Q₁; P3 
D) Q₂; P₂

Quizplus · Accepted Answer

If each firm acted without consideration of the other, they would produce at the output level where marginal revenue equals marginal cost, which in this case is Q₂. Each firm would then charge the highest price consumers are willing to pay at that output level, which is P₂. Therefore, the correct answer is D) Q₂; P₂.

Use the Following to Answer Question(s): Monopoly Through Collusion