Firms 1 and 2 Compete in a Cournot Duopoly

question 42

Multiple Choice

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that, inadvertently, lowers firm 1's marginal cost:

• A)Firm 1's reaction function will shift up.
• B)Firm 2's reaction function will shift up.
• C)Firm 2's reaction function will shift down.
• D)Firm 1's reaction function will shift down.

---

Definitions:

Abraham Maslow

A psychologist known for creating Maslow's hierarchy of needs, a theory in psychology that prioritizes human needs from basic physiological needs to self-actualization.

Physiological Needs

Basic physical requirements essential for human survival, such as food, water, shelter, and sleep, considered the foundation of Maslow's hierarchy of needs.

Lower-order Needs

Basic human needs in Maslow’s hierarchy, such as physiological and safety needs, which must be satisfied before higher-order needs can be pursued.

Maslow's Hierarchy of Needs Theory

A psychological theory that categorizes human needs into a five-level pyramid, starting from basic physiological needs to self-actualization.