In a Cournot Duopoly, We Find That Firm 1's Reaction

question 35

Multiple Choice

In a Cournot duopoly, we find that Firm 1's reaction function is Q₁ = 50 - 0.5Q₂, and Firm 2's reaction function is Q₂ = 75 - 0.75Q₁. What is the Cournot equilibrium outcome in this market?

• A) Q₁ = 20 and Q₂ = 60
• B) Q₁ = 20 and Q₂ = 20
• C) Q₁ = 60 and Q₂ = 60
• D) Q₁ = 60 and Q₂ = 20

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Definitions:

Accounts Payable

Liabilities representing money owed by a company to suppliers or creditors for goods and services received.

Merchandise Inventory

Products that a company buys for resale to customers, representing one of the key assets that contribute to the company's revenue.

Discount

A reduction from the usual cost of something or the interest that is deducted from the face value of a promissory note when it is issued.

Perpetual Inventory System

An inventory management method where updates are made continuously as inventory items are bought and sold.