Question

Suppose that two firms competing in Cournot fashion agree to
produce the collusive outpu_{t.} Given that the two firms
both agree to the collusive output, one of the firms can increase
their profits by cheating and

Raising prices. |
||

Lowering prices. |
||

Producing less output. |
||

None of the responses are correct. |

please help/ explain. Thank you

Answer #1

**ANSWER :: (D) None of the
responses are correct.**

**=> Explanation
::**

**Collusive Output Means Rival
Between Two Firms And They Are agree to Work with Each Other They
Set Higher Price To Get Higher Profit By Both Of The Firms So If In
That Situation Both Firms Agree for Collusive Output And Price
Decide By Both Firms So One Of the Firm Can Not Increase Or
Decrease The Price. So If One Of The Firm Want To Increase Their
Profit By Cheating And Producing High Output. Which Helps The Firm
To sell More Goods Then Another Firm.**

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