In a Market Where Two Firms Compete by Setting Quantity,the

question 114

Multiple Choice

In a market where two firms compete by setting quantity,the Cournot equilibrium has which of the following characteristics?

• A) The two firms' reaction functions intersect.
• B) There is no incentive for the two firms to collude.
• C) The two firms' isoprofit curves intersect one another at the highest point.
• D) The two firms' reaction functions intersect at the highest point where the two firms' isoprofit curves intersect one another.

---

Definitions:

Disposable Income

Post-tax funds households can use for expenditure and savings.

Induced Consumption

Consumer spending that is influenced by changes in income levels, as opposed to spending that is not influenced by such changes.

Disposable Income

The funds that are available to households for saving and spending activities after the deduction of income taxes.

Induced Consumption

The portion of consumer spending that increases with an increase in disposable income, implying that as people earn more, they tend to spend more.