Consider a Cournot duopoly in a homogeneous product market where firm 1’s output is and firm 2’s output is . The inverse demand function is given by . Costs are zero for all levels of output for both firms. At a Cournot equilibrium
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Consider a Cournot duopoly in a homogeneous product market where firm 1’s output is x and firm 2’s output is y. The inverse demand function is given by P = e^(-(x + y)). Costs are zero for all levels of output for both firms. At a Cournot equilibrium (A) each firm produces one unit of output (B) each firm produces two units of output (C) firm 1 produces one unit of output and firm 2 produces two units of output (D) there is no Cournot equilibrium
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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 JNU SSS 2015 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.