Consider two firms, referred to as firms 1 and 2, who compete in a market by choosing quantities produced and face the following inverse demand: P(Q)= 10-20 Each firm has a marginal cost of production of $4.00. Suppose these firms collude by agreeing to produce quantities to maximize their joint profits. Firm 1 sticks to the agreement, but firm 2 does not. If firm 2 can secretly change its produced quantity, how much would it produce?

Consider two firms, referred to as firms 1 and 2, who compete in a market by choosing quantities produced and face the following inverse demand: P(Q)= 10-20 Each firm has a marginal cost of production of $4.00. Suppose these firms collude by agreeing to produce quantities to maximize their joint profits. Firm 1 sticks to the agreement, but firm 2 does not. If firm 2 can secretly change its produced quantity, how much would it produce?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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