Which of the Following Is NOT an Assumption of the Cournot

question 3

Multiple Choice

Which of the following is NOT an assumption of the Cournot model presented in the text?

• A) There are two firms in an industry.
• B) Each firm takes the output of the other firm as given.
• C) Both firms maximize profits.
• D) If the first firm cuts price, the second firm will follow and if the first raises price, the second will not follow.

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Definitions:

Manufacturing Overhead Cost

The indirect costs associated with manufacturing, including expenses related to the operation of the factory like utilities and rent.

Conversion Cost

Direct labor cost plus manufacturing overhead cost.

Equivalent Unit

A measure used in cost accounting to express the amount of work done on a product in terms of fully completed units.

Weighted-Average Method

A process costing method that calculates unit costs by combining costs and outputs from the current and prior periods.