Question

Suppose that two firms competing in Cournot fashion agree to produce the collusive output. Given that...

Suppose that two firms competing in Cournot fashion agree to produce the collusive output. 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

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Homework Answers

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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