Consider a market served by a pair of firms, and . The inverse market demand curve is , where is the output of Firm . Firm 's cost function is and Firm 's cost function is . If Firms and are Cournot duopolists, then the Cournot equilibrium outputs are
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Consider a market served by a pair of firms, 1 and 2. The inverse market demand curve is p=1-(x₁+x₂), where xᵢ is the output of Firm i. Firm 1 's cost function is C₁(x₁)=x₁/2 and Firm 2 's cost function is C₂(x₂)=x₂/3. If Firms 1 and 2 are Cournot duopolists, then the Cournot equilibrium outputs are (A) (x₁,x₂)=(4/18,4/18) (B) (x₁,x₂)=(2/18,5/18) (C) (x₁,x₂)=(5/18,3/18) (D) (x₁,x₂)=(0,1/3)
Also written as: Consider a market served by a pair of firms, 1 and 2. The inverse market demand curve is p=1-(x_1+x_2), where x_i is the output of Firm i. Firm 1 's cost function is C_1(x_1)=x_1/2 and Firm 2 's cost function is C_2(x_2)=x_2/3. If Firms 1 and 2 are Cournot duopolists, then the Cournot equilibrium outputs are
Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.
This question is on Cournot competition, part of Monopolistic competition and oligopoly in Microeconomics.
Firms choosing quantities simultaneously, reaction curves, and equilibrium as the number of firms or costs change.
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Question from the DSE 2006 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.