If one firm in a duopoly increases its production by one unit beyond the monopoly output,that firm's profit ________,the other firm's profit ________,and the total profit of the duopoly ________.
A) increases; increases; increases
B) does not change; does not change; does not change
C) increases; decreases; does not change
D) increases; does not change; increases
E) increases; decreases; decreases

Question

Quizplus · Accepted Answer

In a duopoly, if one firm increases its production beyond the monopoly output, its profit may increase due to selling more units, but the other firm's profit decreases due to increased competition and lower prices. The total profit of the duopoly decreases because the additional output drives down the market price, reducing overall profitability.

If One Firm in a Duopoly Increases Its Production by One