ENGR.ECONOMIC ANALYSIS
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ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Consider two firms, referred to as firms 1 and 2, who compete in a market by choosing quantities produced and face the
following inverse demand:
P(Q) 10-20
Each firm has a marginal cost of production of $4.00.
Suppose these firms collude by agreeing to produce quantities to maximize their joint profits.
Firm 1 sticks to the agreement, but firm 2 does not.
If firm 2 can secretly change its produced quantity, how much would it produce?
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