Consider the Following Information: Inverse Market Demand: P = 12

question 21

Multiple Choice

Consider the following information: Inverse market demand: P = 12 - 0.5(q₁ + q₂) , where q₁ and q₂ are Firm 1's and Firm 2's output
Firm 1's reaction function: q₁ = 9 - 0.5q₂
Firm 2's reaction function: q₂ = 9 - 0.5q₁
The marginal cost of production for both firms is constant at $3. The equilibrium prices in Cournot and Stackelberg competition are _____ and _____, respectively.

• A) $8; $7
• B) $9; $10
• C) $4; $3.50
• D) $6; $5.25

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Definitions:

Efficient Allocation

An economic condition where resources are distributed in a manner that maximizes the net benefits to society.

Infeasible Combination

A combination of goods or services that cannot be produced given the current technology or resources, often represented in economic models.

Coconuts

Tropical fruits known for their hard shell, edible white flesh, and water, utilized for various culinary, cosmetic, and industrial purposes.

Fish

Aquatic, cold-blooded vertebrates with gills and limbs in the form of fins, living in seas or freshwater.