Question

Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. What would you expect to happen next?
A. Bieber and Rihanna will determine that it is in each singer's self interest to maintain the agreement.

B. Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.

C. Bieber and Rihanna will each break the agreement. Both singers' profits will increase.

D. Bieber and Rihanna will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

Answer 1

Answer:

The correct answer is B. Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.

Explanation:

Most likely, their earnings will decrease, because they will have to do their job independently. In the same way, the public will not hire or accept them in the same way as before. You need to get used to this new decision in order to have a better approval.