Both Firms in a Cournot Duopoly Would Enjoy Higher Profits

question 47

Multiple Choice

Both firms in a Cournot duopoly would enjoy higher profits if:

• A) the firms simultaneously reduced output below the Nash equilibrium level.
• B) each firm simultaneously increased output above the Nash equilibrium level.
• C) one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output.
• D) the firms simultaneously reduced output below the Nash equilibrium level and one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output.

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Definitions:

Marginal Costs

The rise in overall expenses resulting from the production of an additional unit.

Total Variable Cost

The sum of expenses that vary directly with the level of output, rephrasing it as the aggregate of costs that fluctuates in tandem with production volume.

Short-Run Supply Curve

A graphical representation showing the quantity of goods that producers are willing and able to sell at different prices, over a short period.

AVC Curve

A graph that shows the average variable costs associated with producing different levels of output, typically demonstrating how costs vary with output volume.