The Duopolists Carl and Simon Face a Demand Function for Pumpkins

question 30

Multiple Choice

The duopolists Carl and Simon face a demand function for pumpkins of Q = 2,200 - 400P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose further that each farmer has a constant marginal cost of $1.50 for each pumpkin produced. If Carl believes that Simon is going to produce Q_s pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits. Carl's reaction function is

• A) R_C(Q_s) = 400 -.
• B) R_C(Q_s) = 2,200 - 800Q_s.
• C) R_C(Q_s) = 800 -.
• D) R_C(Q_s) = 2,200 - 400Q_s.
• E) R_C(Q_s) = 1,200 - Q_s.

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Definitions:

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment, discounted back to their present value.

Worst Case Scenario

The most adverse or negative outcome that can occur in a given situation.

Forecasting Risk

The risk associated with making predictions about future events, which may not turn out as expected, potentially affecting financial projections and decisions.

Cash Flows

The movement of money into and out of a business or project, considered as a measure of its financial health.