If both firms in a duopoly increase their production by one unit beyond the monopoly output,each firm's profit ________ and the total profit of the duopoly ________.
A) increases; increases
B) does not change; does not change
C) decreases; decreases
D) does not change; increases
E) decreases; does not change

Question

Quizplus · Accepted Answer

When both firms in a duopoly increase their production beyond the monopoly output, it typically leads to a decrease in the market price due to increased supply. This decrease in price can reduce each firm's profit margin on their products, leading to a decrease in profit for each firm. Consequently, the total profit of the duopoly also decreases because it is the sum of the profits of the two firms.

If Both Firms in a Duopoly Increase Their Production by One