Consider a game of the "Jack and Jill" type in which a market is a duopoly and each firm decides to produce either a "high" quantity of output or a "low" quantity of output. If the two firms successfully reach and maintain the cooperative outcome of the game, then
A)both the combined profit of the firms and total surplus are maximized.
B)the combined profit of the firms is maximized but total surplus is not maximized.
C)the combined profit of the firms is not maximized but total surplus is maximized.
D)neither the combined profit of the firms nor total surplus is maximized.

Question

Quizplus · Accepted Answer

In a duopoly, if firms cooperate, they can maximize their combined profits by restricting output, similar to a monopoly. However, this does not maximize total surplus, as consumer surplus is reduced compared to a competitive market.

Consider a Game of the "Jack and Jill" Type in Which