(Figure: Monopoly Profits in Duopoly) Use Figure: Monopoly Profits in Duopoly.The figure shows how an industry consisting of two firms that face identical demand curves (D₁) can collude to increase profits.If the firms collude to share the market demand equally,then each firm will act as if its demand curve is given by _,while the market demand curve is given by _.

A) D₁;MR₂
B) D₂;D₁
C) D₁;D₂
D) MR₁;MR₂

Question

(Figure: Monopoly Profits in Duopoly) Use Figure: Monopoly Profits in Duopoly.The figure shows how an industry consisting of two firms that face identical demand curves (D₁) can collude to increase profits.If the firms collude to share the market demand equally,then each firm will act as if its demand curve is given by _____,while the market demand curve is given by _____.

A) D₁;MR₂
B) D₂;D₁
C) D₁;D₂
D) MR₁;MR₂

Sabina Sangachhen · Accepted Answer

Final Answer : C, Explanation :  When the firms collude to share the market demand equally, each firm will act as if its demand curve is given by D 1 , which is their original demand curve. The market demand curve will also remain the same, which is D 2 . Option A is incorrect because MR 2  is not the market demand curve but rather the marginal revenue curve when the firms are colluding. Option B is incorrect because each firm will still face the same demand curve as before collusion. Option D is incorrect because MR 1  is not the demand curve but rather the marginal revenue curve for an individual firm before collusion.

Definitions

Learning Objectives

Learning Objectives

Related questions