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:

Imperfect Knowledge

A situation where all parties in an economic transaction do not possess full or equal information, leading to market failures or inefficiencies.

Return Investors

The profit or loss generated on an investment over a certain period of time, expressed as a percentage of the investment's initial cost.

Economic Profit

The difference between a firm's total revenue and its total economic costs, including both explicit and implicit costs.

Political Influence

The power individuals, groups, or organizations hold to sway or alter government policy or decisions in their favor, often through lobbying or other means.