Based on the demand schedule, at what quantity should the firms under duopoly and collusion will agree to produce? Explain.

Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Oligopoly
Section17.2: The Economics Of Cooperation
Problem 2QQ
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Based on the demand schedule, at what quantity should the firms under duopoly and collusion will agree to produce? Explain.

EXAMPLE: Cell Phone Duopoly in Smalltown
P Q • Smalltown has 140 residents
The "good": cell phone service with
unlimited anytime minutes and free
phone
$0
140
130
10 120
15
110
• Smalltown's demand schedule
20
100
• Two firms: AT&T, Verizon
(duopoly: an oligopoly with two firms)
25
90
30
80
35
70
Each firm's costs: FC = $0, MC = $10
40
60
45
50
Transcribed Image Text:EXAMPLE: Cell Phone Duopoly in Smalltown P Q • Smalltown has 140 residents The "good": cell phone service with unlimited anytime minutes and free phone $0 140 130 10 120 15 110 • Smalltown's demand schedule 20 100 • Two firms: AT&T, Verizon (duopoly: an oligopoly with two firms) 25 90 30 80 35 70 Each firm's costs: FC = $0, MC = $10 40 60 45 50
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