The Duopolists Carl and Simon Face a Demand Function for Pumpkins

question 55

Multiple Choice

The duopolists Carl and Simon face a demand function for pumpkins of Q = 2,200 - 400P, 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 $1.50 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

• A)R_C(Q_s)= 400 - Qs/2.
• B)R_C(Q_s)= 2,200 - 800Q_s.
• C)R_C(Q_s)= 800 - Qs/2.
• D)R_C(Q_s)= 2,200 - 400Q_s.
• E)R_C(Q_s)= 1,200 - Q_s.

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Definitions:

Net Operating Income

A measure of a property's profitability, calculated by subtracting all operating expenses from the gross operating income.

Variable Costing

An accounting method that considers only variable production costs (such as materials and labor) in the calculation of product costs.

Net Operating Income

The profit derived from a company's regular business operations after deducting operating expenses such as rent, wages, and utilities.

Direct Labor Cost

The total cost of workforce expenses directly involved in the manufacturing of products or delivery of services, excluding indirect labor costs.