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Please not just give the answer D, justify the answer with diagram or mathematical proof! Consider an industry composed of only two firms, each producing an identical product. Both firms have identical marginal (and

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Let us suppose that here we have two firms with zero cost of production. So as collusive agreement they will produce monopoly output Q1 where MR=MC=o.Now firm 1 cheats. As a result output rises to Q2. Note now industry. profits of CDOQ2 are less than earlier industry profit of ABOQ1. Since price of products have fallen profits of firm 2 will fall since it sticks to agreement and produces same output as earlier.

Note profit=revenue-cost=revenue here since cost of production is zero

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