The table below shows the monthly demand schedule for a good in a duopoly market

Question

The table below shows the monthly demand schedule for a good in a duopoly market. The two producers in this market each t $5000 of fixed costs per month. There are no marginal costs. Quantity Price ($) TR ($) MR (5) 40 35 30 25 20 15 10 35 25 15 200 400 600 800 1,000 1,200 1,400 1,660 7,000 12,000 15,000 16,000 15,000 12,000 7,800 15 25 35 Instructions: Enter your answers to the nearest whole number a. If they evenly split the quantity a monopolist would produce, the monthly profit for each duopolist is b. If duopolist A decides to increase production by 200 units, the monthly profit for duopoltist A is and for duopolist B S

Explanation / Answer

a> As there is no MC, it is equal to zero, thus for MR>=MC, 800 output is produced,

Thus profit will be 16000/2-5000=3000

b> Monthly profit of A is 15x600-5000=4000

Monthly profit of B is 15x400-5000=1000

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