Question 9 01 pts Updat Figure 171 MC Demand Refer to Figure

Question 9 0/1 pts Updat Figure 17-1 MC Demand Refer to Figure 17-1. Suppose this market is served by a duopoly in which each firm faces the marginal cost curve shown in the diagram. The marginal revenue curve that a monopolist would face in this market is also shown. Which of the following statements is true The total output in this market will likely be 2 units when the market is served by a duopoly The price in this market will likely be $6 when the market is served by a duopoly The total revenue to each firm will likely be more than $16 when the market is served by a duopoly The total output in this market will likely be less than 4 units when the market is served by a duopoly

Solution

Answer : Option number a is correct.

Because from the given diagram it is clear that each firm of a duopoly in the market collude with each other and in collusive market the equilibrium condition occur at that point where MR = MC. In the diagram at output level 2 units, MR = MC. This means the market total output level is 2 units on which each firm charges $8 and hence

Total market revenue = price * output level = 8 * 2 = $16. As in duopoly market two firms exist, then here each firm\'s total revenue = 16 / 2 = $8.

Now here it is clear that only option number a is true out of the given options.