Firms 1 and 2 Compete in a Cournot Duopoly

question 50

Multiple Choice

Firms 1 and 2 compete in a Cournot duopoly. If firm 2 adopts a strategy that raises firm 1's marginal cost:

• A) firm 1 will increase its output.
• B) firm 2 will lose market share.
• C) firm 1 will enjoy higher profits.
• D) None of the statements is correct.

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Definitions:

Portfolio's Expected Rate

The anticipated rate of return on a portfolio, based on the portfolio's asset allocation, expected performance, and market conditions.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, often used in statistics to quantify the volatility of a financial instrument.

Probability Distribution

An analytic function detailing the entire set of potential outcomes and their probabilities for a random variable within a certain range.

Global Minimum Variance Portfolio

An investment portfolio constructed to achieve the lowest possible risk (variance), given a set of securities.