Suppose Two Cournot Duopolist Firms Operate at Zero Marginal Cost

question 4

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:

MRP

MRP stands for Marginal Revenue Product, which is the additional revenue generated from employing one more unit of a factor of production, such as labor or capital.

Nonunionized

Workplaces or employees that are not part of a labor union and do not engage in collective bargaining.

Efficiency Wages

Wages that are deliberately set above the market equilibrium level by employers to increase productivity and efficiency among employees.

Below-equilibrium

A situation where the quantity demanded exceeds the quantity supplied at a given price.