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Is the courtnot equilibrium preferable to the monopoly equilibrium? Explain your answer.

Is the courtnot equilibrium preferable to the monopoly equilibrium? Explain your answer.
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Answer #1

yes cornet equilibrium is preferable to monopoly situation because it results in higher level of output as compared to output under monopoly market .

in the original cornet model where there are two firms and MC = 0 , in cornet solution each firm produces 1/3rd of the total market and together they cover 2/3rd of the total market . But if these firms collude to act as monopolist they will produce only 1/2 of the market each producing 1/4th of the total market .

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