Discussion
Assertion (A) : Non-collusive model of Chamberlin asserts that a stable equilibrium can be reached if each firm charges Monopoly price and equally shares the market demand for their products.
Reason (R) : Reasoning is that the firms recognize mutual interdependence in terms of action and reaction with regard to price decision with the objective of profit maximization which will be realized if prices are determined at a level which equals marginal cost.
Answer: A
The key treats both statements as correct, with the reason explaining the assertion. In Chamberlin's non-collusive oligopoly solution each seller recognises that rivals will match any price cut, so undercutting gains nothing. Every firm therefore charges the monopoly price and takes an equal share of the market, and this outcome is stable because the firms recognise their mutual interdependence. Option B is wrong because the reason is the supporting argument for the assertion rather than an error. Option C is wrong because the recognition of interdependence is exactly what produces the shared monopoly price. Option D is wrong because the assertion states the standard Chamberlin result.
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