Asked by Sumayyah Bachooa on Jun 12, 2024
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(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.The market demand curve is D2. Which assumption is part of the analysis illustrated by the model?
A) The two firms have identical marginal cost but different average total cost.
B) The two firms sell differentiated products.
C) The MR curve is not relevant to either firm's choices.
D) The firms can act as a cartel and maximize their combined economic profit.
Identical Demand
A market condition in which all consumers have the same desire or need for a product, leading to a uniform demand curve.
Economic Profit
The balance difference between total revenues and complete costs, encompassing both overt and intangible costs.
Cartel
An agreement among competing firms to control prices or exclude entry of a new competitor in a market, often to maximize profits illegally or unethically.
- Comprehend the economic effects of duopolies and cartels on the dynamics of markets.
- Ascertain the scenarios in which companies within an oligopoly decide between competition and collaboration.
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Learning Objectives
- Comprehend the economic effects of duopolies and cartels on the dynamics of markets.
- Ascertain the scenarios in which companies within an oligopoly decide between competition and collaboration.
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