Suppose That Two Airlines Are Cournot Duopolists Serving the Peoria-Dubuque

question 37

Multiple Choice

Suppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route, and the demand curve for tickets per day is Q = 220 - 2p (so p = 110 - ) . Total costs of running a flight on this route are 1,400 + 20q, where q is the number of passengers on the flight. Each flight has a capacity of 80 passengers. In Cournot equilibrium, each duopolist will run one flight per day and will make a daily profit of

• A) $400.
• B) $800.
• C) $220.
• D) $700.
• E) $3,000.

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Definitions:

Verification

The process of confirming the truth, accuracy, or validity of something, often involving the examination of evidence or conducting tests.

Satisficing

A decision-making strategy that entails choosing an option that meets a minimum level of satisfaction, rather than the optimal solution, due to constraints such as limited information or time.

Prospect Theory

A behavioral economic theory that describes how people make decisions between alternatives that involve risk, where the potential for losses influences choices more than equivalent gains.

Closing Costs

Fees and expenses, over and above the price of the property, incurred by buyers and sellers in transferring ownership of a property.