Which one of the following statements is FALSE about a market characterized by t

Question

Which one of the following statements is FALSE about a market characterized by the market structure we call duopoly (that is an oligopoly with only 2 firms) under Cournot competition?

A. The Nash equilibrium exists even if the firms have different cost structures.

B. In the Nash equilibrium the combined profit of the two firms is higher than the combined profits of the two firms if they acted as perfectly competitive firms.

C. The Nash equilibrium market price is less than the price charged by a simple monopolist but more than the competitive price.

D. In the Nash equilibrium the combined profit of the two firms is higher than the combined profits of the two firms if they successfully colluded.

E. In the Nash equilibrium deadweight loss is less than for a simple monopolist in the same market, but still positive.

Explanation / Answer

Correct option (D).

Combined profit under Nash equilibrium is less than combined profit in case of a duopolist collusion.

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