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Scenario: Two Identical Firms
Two identical firms make up an industry in which the market demand curve is represented by Q = 5 000 - 4P,where Q is the quantity demanded and P is the price per unit.The marginal cost of producing the good in this industry is constant and equal to $650.Fixed cost is zero.
-(Scenario: Two Identical Firms)Use Scenario: Two Identical Firms.If one firm decides to cheat,the cheating firm will:

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If one firm decides to cheat by lowering its price, it will increase its quantity sold and capture a larger market share. This will initially lead to an increase in its profits. However, the other firm, which is still selling at the initial price, will face a decrease in its quantity sold and market share, leading to a decrease in its profits. Therefore, only the cheating firm will see an increase in profits initially.

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