If a Cournot Duopolist Announced That It Will Double Its

question 104

Multiple Choice

If a Cournot duopolist announced that it will double its output,the other firm does not view the announcement as credible because

• A) the announcing firm's profits will fall if it carries out the threat.
• B) the other firm's profits will fall if the announcing firm carries out the threat.
• C) the other firm's profits will rise if the announcing firm carries out the threat.
• D) the other firm will double output also.

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Definitions:

Government Spending

Expenditures by government bodies on goods and services that influence the economy's overall activity.

Recessionary Gap

A situation in macroeconomics when an economy operates below its full-employment equilibrium, leading to a gap in output.

Government Spending

The total amount of public expenditure by government entities on goods, services, and public projects.

Automatic Stabilizers

Economic policies and programs designed to offset fluctuations in a nation's economic activity without intervention by the government or policymakers, such as unemployment insurance and progressive taxation.