Suppose That Firms a and B Are Cournot Duopolists in the Salt

question 53

Multiple Choice

Suppose that firms A and B are Cournot duopolists in the salt industry.The market demand curve can be specified as The marginal cost to each firm is $40.Suppose that firm A is producing 100 units.What is firm B's profit-maximizing quantity?

• A) 100.
• B) 60.
• C) 30.
• D) 20.

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Definitions:

Perfectly Elastic

A situation in economics where the quantity demanded or supplied changes by an infinite amount in response to any change in price; depicted by a horizontal line in price-quantity graphs.

Collusion

Cooperation among producers to limit production and raise prices so as to raise one another’s profits.

Barriers To Entry

Barriers to entry are obstacles that make it difficult for new competitors to enter an industry, including high initial investment costs, strict regulations, or strong brand loyalty among existing customers.

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.