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CHAPTER 16
OLIGOPOLY
355
“I could produce 30 gallons as well. In this case, a total of 60 gallons of water
would be sold at a price of $60 a gallon. My profit would be $1,800 (30 gallons
±
$60 a gallon). Alternatively, I could produce 40 gallons. In this case, a total of 70
gallons of water would be sold at a price of $50 a gallon. My profit would be $2,000
(40 gallons
±
$50 a gallon). Even though total profit in the market would fall, my
profit would be higher, because I would have a larger share of the market.”
Of course, Jill might reason the same way. If so, Jack and Jill would each bring
40 gallons to town. Total sales would be 80 gallons, and the price would fall to $40.
Thus, if the duopolists individually pursue their own selfinterest when deciding
how much to produce, they produce a total quantity greater than the monopoly
quantity, charge a price lower than the monopoly price, and earn total profit less
than the monopoly profit.
Although the logic of selfinterest increases the duopoly’s output above the
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.
 Spring '10
 abijian

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