The inverse market demand curve is P = 170 – 4Q. Two firms in this market...

The inverse market demand curve is P = 170 – 4Q. Two firms in this market are evenly splitting the output. Each firm produces the product at a constant marginal cost of $10. Which of the following statements is TRUE? I. If one firm produces 2 more units of output, its profits will rise to $864. II. If neither firm cheats, each firm will earn a profit of $800. III. If one firm produces 3 more units of output, the other firm's profits will fall to $680.

Solutions

Expert Solution

Statement 1 is true.

Statement 2 is true.

Statement 3 is true.

Rahul Sunny answered 3 weeks ago

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