Use the following to answer questions:
-(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil is zero. If the two firms collude to share the market equally, the price of crude oil will be _____, firm 1 will produce _____ barrels, firm 2 will produce _____ barrels, and each firm will earn revenue equal to _____.
A) $80; 80; 80; $6,400
B) $80; 40; 40; $3,200
C) $60; 50; 50; $3,000
D) $40; 60; 60; $2,400

Question

Use the following to answer questions: 
-(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that the crude oil industry is a duopoly and the marginal cost of producing crude oil is zero. If the two firms collude to share the market equally, the price of crude oil will be _____, firm 1 will produce _____ barrels, firm 2 will produce _____ barrels, and each firm will earn revenue equal to _____.
A) $80; 80; 80; $6,400 
B) $80; 40; 40; $3,200 
C) $60; 50; 50; $3,000 
D) $40; 60; 60; $2,400

Quizplus · Accepted Answer

If the firms collude, they will act like a monopoly and maximize joint profits. The price of $80 corresponds to a quantity of 80 barrels in total (40 barrels each), leading to revenue of $3,200 per firm.

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