Suppose Two Cournot Duopolist Firms Operate at Zero Marginal Cost

question 58

Multiple Choice

Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is

• A)q1 = (a - bq2)/2b.
• B)q1 = (a - 2bq2)/2b.
• C)q1 = a/b.
• D)q1 = a/2b.

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Definitions:

Production Targets

Specific goals set for the quantity of products to be produced within a certain time frame.

Invisible Hand

A concept introduced by Adam Smith to describe the self-regulating nature of the market, where individual self-interests unintentionally benefit the economy as a whole.

Market Failures

Circumstances where a free market's distribution of goods and services is inefficient, frequently warranting the involvement of the government.

National Economic Plan

A comprehensive strategy formulated by a government to stabilize the economy and stimulate growth.