The Cournot Theory of Oligopoly Is Based on the Assumption

question 113

Multiple Choice

The Cournot theory of oligopoly is based on the assumption that each firm believes that rivals will:

• A) keep their output constant if it changes its output.
• B) increase their output whenever it increases its output.
• C) decrease their output whenever it increases its output.
• D) randomly change output whenever it changes its output.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or business activity, such as rent, salaries, and insurance.

Gross Margin Percentage

A profitability ratio that shows the percentage of sales revenue remaining after deducting the cost of goods sold, indicating the financial health and performance of a company's core activities.

Sales Volume

The quantity of products or services sold by a company within a specific period, often used as an indicator of business activity.

Return On Total Assets

A financial metric that measures the efficiency of a company in generating profits from its total assets.