Table 17-31 Imagine a Small Town in a Remote Area Where Only

question 263

Essay

Table 17-31
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below:
-Refer to Table 17-31. Briefly explain why each duopolist earns a lower profit at the Nash equilibrium than if they cooperated to produce the monopoly output.

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Definitions:

Profitable Use

Utilizing resources or an asset in a manner that generates a favorable financial return.

Current Profitability

A measure of a firm's current financial performance, often assessed by examining current income and profitability ratios.

Emphasized

Highlighted or given special attention or prominence in a context or discussion.

Milling Machine

A machine tool used to shape solid materials by removing excess material with rotary cutters.