There Are Two Major Producers of Corncob Pipes in the World

question 29

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:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.

Income Effect

Shifts in economic or personal income and how these shifts influence the demand for certain goods or services.

Disparity of Income

The gap in income and wealth distribution among individuals or groups within a society, leading to economic inequality.

Nominal Wages

The amount of money paid to employees without adjustment for inflation, reflecting the face value rather than the real purchasing power.