Figure 17-1
-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?
A)The total output in this market will likely be 2 units when the market is served by a duopoly.
B)The price in this market will likely be $6 when the market is served by a duopoly.
C)The total revenue to each firm will likely be more than $16 when the market is served by a duopoly.
D)The total output in this market will likely be less than 4 units when the market is served by a duopoly.

Question

Figure 17-1 
-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?
A)The total output in this market will likely be 2 units when the market is served by a duopoly. 
B)The price in this market will likely be $6 when the market is served by a duopoly. 
C)The total revenue to each firm will likely be more than $16 when the market is served by a duopoly. 
D)The total output in this market will likely be less than 4 units when the market is served by a duopoly.

Quizplus · Accepted Answer

When a market is served by a duopoly, the total output is determined by the intersection of the two firms' marginal cost curves, which occurs at point E in the diagram. At this point, each firm will produce 2 units of output, resulting in a total output of 4 units in the market. This rules out options A and C. The price in the market will be determined by the point on the marginal revenue curve that corresponds to a total output of 4 units, which is point F. At this point, the price is $5, ruling out option B. Therefore, the correct answer is D, as the total output in the market will likely be less than 4 units when it is served by a duopoly.

Figure 17-1 -Refer to Figure 17-1. Suppose This Market Is Served by Is