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Unformatted text preview: ou and capture more of the profit. – Then in response you may choose to retaliate and decrease your price even more. – We saw this in our exercise. Firms who work independently will continue to decrease their price until they can not decrease their price any more. – This is the point where P=MR=MC (the competitive firm equilibrium). – Or where the firms in an oligopoly are acting like competitive firms. 8 Actions for Firms: Act Independently Actions for Firms: Act Independently So in summary: – Firms who act independently lead to competitive level prices and quantities in total. – This means they price and produce where P=MR=MC. – This means the firm may have short run p...
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