The table below shows the monthly demand schedule for a good in a duopoly market
ID: 1119628 • Letter: T
Question
The table below shows the monthly demand schedule for a good in a duopoly market. The two produ $4800 of fixed costs per month. There are no marginal costs. cers in this market each face Quantity Price (S) 40 35 30 25 20 TR (S) 200 400 600 800 1,000 7,000 12,000 15,000 16,000 15,000 35 25 15 10 25 35 7,000 1,600 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 Answer is complete but not entirely correct. $ 8,000
Explanation / Answer
From the table given above, a monopolist will produce at a point where MR equals MC or at a point where MR is greater than marginal cost . Therefore, the market will produce 800 units. Each will produce 400 units.
Mothly profit for each duopolist:
TR =400 x 30 =1200
TC = 4800
Profit = (4800-1200) = $3600
b. If duopolist A decides to increase production by 200 units :
Total quantity produced by A : 600 units
Quantity produced by B : 400 units
Total quantity produced : 1000 units
profit for duopolist A : (15)(600)-4800= (9000-4800) = $4200
profit duopolist B : (15)(400)-4800 =6000-4800 = $1200
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