Indicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. Answer 1 & 2 1. If a monopsonist faces a perfectly elastic supply curve, there will be no deadweight loss relative to the competitive outcome 2. In a Cournot duopoly market, the two firms agree to produce half of the monopoly output level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.
Indicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. Answer 1 & 2 1. If a monopsonist faces a perfectly elastic supply curve, there will be no deadweight loss relative to the competitive outcome 2. In a Cournot duopoly market, the two firms agree to produce half of the monopoly output level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.1P
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Indicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. Answer 1 & 2
1. If a monopsonist faces a perfectly elastic supply curve, there will be no
loss
2. In a Cournot duopoly market, the two firms agree to produce half of the
output level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.
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