Consider a Cournot Oligopoly Consisting of Four Identical Firms Producing

question 9

Multiple Choice

Consider a Cournot oligopoly consisting of four identical firms producing good X.If the firms produce good X at a marginal cost of $7 per unit and the market elasticity of demand is −2,determine the profit-maximizing price.

• A) $6 per unit
• B) $8 per unit
• C) $10 per unit
• D) $12 per unit

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Definitions:

Certainty Effect

A cognitive bias where people give greater weight to outcomes that are certain, compared to outcomes that are only probable.

Reactance

An inspired response to propositions, individuals, guidelines, or policies that challenge or remove certain freedoms of behavior.

Risk Aversion

In decision making, the greater weight given to possible losses than possible gains.

Temporal Discounting

The tendency to value immediate rewards more highly than future rewards, leading to impulsive decisions.