Suppose a Duopoly Had Reached the Monopoly Outcome and Then

question 196

Multiple Choice

Suppose a duopoly had reached the monopoly outcome and then the first firm increased its production.If the second firm next increases its production,the second firm's profit ________ and the first firm's profit ________.

• A) increases; increases
• B) increases; decreases
• C) decreases; increases
• D) decreases; decreases
• E) increases; does not change

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Definitions:

Systematic Risk

The type of risk inherent to the entire market or an entire market segment, which cannot be mitigated through diversification.

Correlated Changes

Refers to situations where two or more variables move in relation to each other.

Economy

The large set of inter-related production and consumption activities that aid in determining how scarce resources are allocated.

Market Portfolio

A theoretical bundle of investments that includes every available asset in the market, weighted by market capitalization.