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Homework answers / question archive / All else equal, two firms in a Chamberlin oligopoly will charge a _____ price than two firms in a Cournot oligopoly and earn _____ economic profit

All else equal, two firms in a Chamberlin oligopoly will charge a _____ price than two firms in a Cournot oligopoly and earn _____ economic profit

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All else equal, two firms in a Chamberlin oligopoly will charge a _____ price than two firms in a Cournot oligopoly and earn _____ economic profit.

A. lower; more

B. higher; less

C. lower; less

D. higher; more

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D. Higher ; more

Reason: In the Chamberlin model of oligopoly, the two sellers after making their first move in the market (regarding price and output decisions), in their second move realise the interdependence of their decisions on each other. This is unlike the Cournot Model, where the sellers will continue to assume that the other seller will keep the level of output constant. In the Chamberlin model, each producer will eventually produce half of the monopoly output and charge a monopoly price, reaching to a stable equilibrium. In this way both the producers will tend to maximise their joint profits. Thus the oligopolists in Chamberlin model will tend to charge higher price and sell lesser quantity of output than the oligopolists in Cournot model, and thus earn higher amount of economic profits.

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