An Increase in Firm 2's Marginal Cost Will Cause

question 93

Multiple Choice

An increase in firm 2's marginal cost will cause:

• A) a downward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.
• B) an upward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
• C) a downward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
• D) an upward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.

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Definitions:

Inseparability

A characteristic of service marketing that indicates the simultaneous production and consumption of a service, implying that services cannot be separated from their providers.

Services

Intangible and non-physical goods provided to consumers, including activities, benefits, or satisfactions offered for sale.

Service Continuum

Describes the range of offered services between pure tangible goods and pure services, showing how most products are a combination of both.

Potatoes

A staple food crop known for its starchy tubers, widely cultivated and consumed around the world.