Suppose That Firms $A$ And $B$ Are Cournot Duopolists in the Salt Industry

question 13

Multiple Choice

Suppose that firms $A$ and $B$ are Cournot duopolists in the salt industry. The market demand curve can be specified as $P = 200 - Q _ { A } - Q _ { B }$ . The marginal cost to each firm is $\$ 40$ . What is firm $B$ 's profit-maximizing quantity when firm A produces an arbitrary output $Q _ { A }$ ?

• A) \(Q _ { B } = 160 - Q _ { A }\).
• B) \(Q _ { B } = 160 - 2 Q _ { A }\).
• C) \(Q _ { B } = 80 - Q _ { A }\).
• D) \(Q _ { B } = 80 - \frac { 1 } { 2 } Q _ { A }\).

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Definitions:

Normal Profit

Normal profit is the minimum level of profit needed for a company to remain competitive in the market, equivalent to the opportunity cost of capital.

Purely Competitive Market

A market framework where numerous buyers and sellers exist, there's unrestricted access and departure, and the product is uniform, which results in participants accepting the market price as given.

Economic Profit

Profit calculated by subtracting both explicit and implicit costs from total revenues, providing a measure of the true economic performance of a venture.