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a)
To calculate: the
a)
![Check Mark](/static/check-mark.png)
Explanation of Solution
When the market is perfectly competitive, the price will be zero and the quantity will be 12 as represented in the table given in the question.
In a perfectly competitive market, the price equals the MC (marginal cost) in the long-run equilibrium, so the price will be zero and the quantity will be 12.
The equilibrium point is the point where MC=MR.
Perfect competition: In perfect competition, the number of buyers and sellers is very large and the firms are usually price takers; therefore, no individual firm has the power to influence the market price.
b)
To calculate: the market price and quantity, when the market is a duopoly and the firms collude to maximize the joint profits.
b)
![Check Mark](/static/check-mark.png)
Explanation of Solution
In case the market is a duopoly, the price will be $12 and the quantity will be 6.
In order to maximize joint profits, the 2 firms would act as a
Going from 2 to -2 MR passes through zero after the 6th unit, making the 6th profit-maximizing quantity.
Most consumers would pay for 6 units is $ 12, so that is the profit-maximizing price.
Introduction:
Duopoly: is defined as a type of oligopoly in which two firms have exclusive or dominant control over a market. It is one of the most frequently studied forms of an oligopoly because of its simplicity.
Duopolies usually sell their products to customers in a competitive market in which the preferences and choices of an individual consumer will not affect the firm.
c)
To calculate: the firm’s total revenue when the firms split the market equally when the market is a duopoly and the firms collude to maximize the joint profits.
c)
![Check Mark](/static/check-mark.png)
Explanation of Solution
Total revenue is calculated by multiplying price and quantity i. e P X Q
Total revenue is $12 X 6= $72.
Therefore, by dividing this equally each firm receives $36.
Introduction:
Duopoly: is defined as a type of oligopoly in which two firms have exclusive or dominant control over a market. It is one of the most frequently studied forms of an oligopoly because of its simplicity.
Duopolies usually sell their products to customers in a competitive market in which the preferences and choices of an individual consumer will not affect the firm.
Chapter 64 Solutions
Krugman's Economics For The Ap® Course
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