An Increase in Firm 1's Marginal Cost Will Cause

question 26

Multiple Choice

An increase in firm 1's marginal cost will cause:

• A) 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.
• B) 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.
• C) 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.
• D) 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.

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Definitions:

Melanin Pigment

A natural pigment found in most organisms, responsible for hair, skin, and eye color; provides protection against UV radiation.

Choroid

A layer of blood vessels and connective tissue between the sclera and retina in the eye, providing oxygen and nourishment to the outer layers of the retina.

Pigmented Epithelium

Specialized epithelial cells that contain pigment granules, involved in coloration and protection against sunlight, such as those found in the retina.

Lacrimal Puncta

Small openings on the inner sides of the eyelids that drain tears into the lacrimal ducts.