Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost.
-Refer to Table 17-11. How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?
A)$5
B)$10
C)$15
D)$20

Question

Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. 
-Refer to Table 17-11. How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?
A)$5 
B)$10 
C)$15 
D)$20

Quizplus · Accepted Answer

In the Nash equilibrium, each firm produces 10 units and earns a profit of $30. If they jointly maximize profits, they would produce a total of 20 units and charge a price of $20, earning a profit of $400, which is $20 more than what they earn in the Nash equilibrium. Therefore, each firm earns $10 less in the Nash equilibrium than if they jointly maximize profits, for a total of $20 less. Hence, the correct answer is (D) $20.

Table 17-11 Only Two Firms, ABC and XYZ, Sell a Particular Product