An Agreement Between Two Duopolists to Function as a Monopolist

question 9

Multiple Choice

An agreement between two duopolists to function as a monopolist usually breaks down because

• A)they cannot agree on the price that a monopolist would charge.
• B)they cannot agree on the output that a monopolist would produce.
• C)each duopolist wants a larger share of the market to capture more profit.
• D)each duopolist wants to charge a higher price than the monopoly price.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of the good demanded, typically downward sloping, indicating that demand increases as price decreases.

Monopolistically Competitive

A market structure in which many firms sell products that are similar but not identical, allowing for product differentiation.

Perfectly Competitive

Describes a market structure where many firms offer homogeneous products, and no single buyer or seller can influence the market price.

Long-Run Equilibrium

A state in an economy or market where all factors of production are fully employed and economic forces are in balance, persisting over a long period.