Suppose that Microsoft and Google compete in the market for PC Internet browsers.Initially these firms compete as Cournot duopolies with symmetric reaction functions.If Microsoft enters into exclusive contracts with PC suppliers that preclude suppliers from loading Google's Internet browser on PCs loaded with the Windows operating system,then Google's marginal cost of distributing its browser will increase to $5 per unit. The new equilibrium would entail Microsoft supplying __________ browsers and Google supplying ____________ browsers to the market.The end result is ________ profits for Google.
A) more; fewer; lower
B) fewer; more; higher
C) more; more; lower
D) fewer; fewer; higher

Question

Quizplus · Accepted Answer

By entering into exclusive contracts with PC suppliers, Microsoft increases the marginal cost for Google to distribute its browser, making it less competitive. As a result, Microsoft would supply more browsers due to reduced competition, while Google would supply fewer browsers because of the increased costs and reduced access to the market. Consequently, Google's profits would be lower due to decreased market share and increased costs.

Suppose That Microsoft and Google Compete in the Market for PC