There Are Two Major Producers of Corncob Pipes in the World

question 23

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 - 4q, 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) 40 - 4q₂
• B) 160 - 4q²₂
• C) 20 - .5q₂
• D) 160 - 4q₂
• E) 164 - 8q₂

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Definitions:

Static Theory

Static theory describes a situation or model in economics that does not account for changes over time, analyzing a fixed point or period instead.

Capital Structure

The mix of various forms of external funds used to finance a company's operations, typically consisting of debt and equity.