Consider a Cournot Oligopoly Consisting of Four Identical Firms Producing

question 9

Multiple Choice

Consider a Cournot oligopoly consisting of four identical firms producing good X.If the firms produce good X at a marginal cost of $7 per unit and the market elasticity of demand is −2,determine the profit-maximizing price.

• A) $6 per unit
• B) $8 per unit
• C) $10 per unit
• D) $12 per unit

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Definitions:

Demand Increased

A situation where the desire or need for a product or service rises, leading to potentially higher prices and/or increased production.

Quantity Demanded

The overall volume of a good or service that individuals are prepared and capable of buying at a given price.

Demand Decreased

A situation where the desire or need for a particular product or service declines.

Demand Increased

A situation where the desire to purchase goods and services at a given price level rises, leading to higher quantity demanded.