There Are Two Major Producers of Corncob Pipes in the World

question 7

Multiple Choice

There are two major producers of corncob pipes in the world, both located in Herman, Missouri. Suppose that the inverse demand function for corncob pipes is described by p = 160 - 3q, where q is total industry output, and marginal costs are zero. What is the Cournot reaction function of firm 1 to the output, q₂, of firm 2?

• A) 160 - 3q²₂
• B) 160 - 3q₂
• C) 26.67 - .5q₂
• D) 53.33 - 3q₂
• E) 163 - 6q₂

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Definitions:

Average Accounting Return

The ratio of the average net income that an investment generates to the average book value of the investment over its life.

Salvage Value

The estimated residual value of an asset after it has been fully depreciated and is no longer in use.

Straight-line Method

A technique that evenly distributes the expense of an asset across its lifespan for depreciation calculation.

Discounted Payback

The period it takes for an investment to break even in cash flow terms, adjusted for the time value of money.