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:

Marginal Utility

The additional satisfaction or benefit (utility) a consumer derives from consuming an additional unit of a good or service.

Total Utility

The total satisfaction received from consuming a certain quantity of goods or services.

Consumer Surplus

The difference between the maximum amount a consumer is willing to pay for a good or service and the actual amount they do pay.

Marginal Utility

The additional satisfaction or utility that a consumer receives from having one more unit of a good or service.