Question of the Week – Economics

Yes, the correct answer is Neither I nor II.

Marginal revenue at equilibrium for any type of market is equal to marginal price. If marginal
revenue is greater than marginal price, profit is less because of
underproduction. If marginal revenue is less than marginal price,
overproduction digs into profit.

All companies don’t need to produce the same amount of
output. For one, the companies may not be on the same scale, there may be
significant underlying differences between them. Also, the level of output is
also determined by how the companies play the price war game, their opportunity
to lead, their level of aggressiveness.