If both firms in a duopoly cheat on a collusive agreement, the price _______ and both firms are
_______.
A) rises; better off
B) falls; worse off
C) rises; worse off
D) falls; better off

Question

Quizplus · Accepted Answer

When both firms in a duopoly cheat on a collusive agreement, they typically increase their output beyond the agreed levels, leading to an oversupply in the market. This oversupply causes the price to fall, and because each firm is now selling at a lower price, their profits decrease, making them worse off than if they had adhered to the agreement.

If Both Firms in a Duopoly Cheat on a Collusive