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:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's receivables that may not be collectible.

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Outstanding payments from customers to a company for delivered goods or rendered services.

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The book value of assets and liabilities reported in the financial statements, considering depreciation or amortization.

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