3. sider a market in which a monopolist would charge at a price of $10 for a particular good. Assume now the market is currently dominated by a pair of Bertrand duopolists who produce identical goods and compete on price in a one-shot game. They both face a marginal cost of $5. They start with colluding and agreeing to charge the monopoly price of $10 in an effort to maximize their profits. In equilibrium, the market price of the good will be... (a) Over $10 (b) $10 (c) Between $5 and $10 (d) $5 (e) Less than $5 (f) None of the above Answer: 3d. A price war will break out, lowering the price to $5.
3. sider a market in which a monopolist would charge at a price of $10 for a particular good. Assume now the market is currently dominated by a pair of Bertrand duopolists who produce identical goods and compete on price in a one-shot game. They both face a marginal cost of $5. They start with colluding and agreeing to charge the monopoly price of $10 in an effort to maximize their profits. In equilibrium, the market price of the good will be... (a) Over $10 (b) $10 (c) Between $5 and $10 (d) $5 (e) Less than $5 (f) None of the above Answer: 3d. A price war will break out, lowering the price to $5.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 3SCQ: Consider the curve in the figure below, which shows the market demand. marginal cost, and marginal...
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