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Author Question: If firms in duopoly collude and operate as a monopoly, the industry produces more output compared to ... (Read 58 times)

lindiwe

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on: Jun 29, 2018
If firms in duopoly collude and operate as a monopoly, the industry produces more output compared to the Nash equilibrium. True or false? Explain.
 
  What will be an ideal response?

Question 2

Because of a decrease in labor costs, a monopoly finds that its marginal cost and average total cost have decreased. The monopoly ________ its price and ________ its quantity.
 
  A) raises; increases
  B) raises; decreases
  C) lowers; increases
  D) lowers; decreases


jackie

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The statement is false. In the Nash equilibrium, both firms cheat and output is the same as in perfect competition. If the firms operate as a monopoly, the industry's profit-maximizing level of output is below the competitive level.

Answer to Question 2

C


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