Suppose That the Duopolists Carl and Simon Face a Demand

question 4

Multiple Choice

Suppose that the duopolists Carl and Simon face a demand function for pumpkins of Q = 8,400 - 800P, 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 $.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 R_C (Q_s) =

• A)2,000 - Q_s/2.
• B)8,400 - 800Q_s.
• C)8,400 - 1,600Q_s.
• D)4,000 - Q_s/2.
• E)6,000 - Q_s.

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Definitions:

Purchase Accounting Method

An accounting approach used in mergers and acquisitions, where the assets and liabilities of the acquired company are added to the acquirer's balance sheet at their current fair market values.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Tender Offer

A tender offer is a proposal made publicly by an investor or company to purchase some or all of shareholders' shares in a corporation at a specified price.

Consolidation

The process of combining multiple companies or financial statements, often to present a unified set of financials or to merge businesses.