Suppose That the Duopolists Carl and Simon Face a Demand

question 1

Multiple Choice

Suppose that the duopolists Carl and Simon face a demand function for pumpkins of Q = 16,800 - 800P, 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 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 R_C (Q_s) =

• A)16,800 - 800Q_s.
• B)4,000 - Q_s/2.
• C)8,000 - Q_s/2.
• D)16,800 - 1,600Q_s.
• E)12,000 - Q_s.

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Definitions:

Excise Taxes

Taxes imposed on specific goods, such as tobacco and alcohol, either as a fixed amount per unit or as a percentage of the price.

Regressive

Relating to a tax system that disproportionately impacts those with lower incomes, or to policies that may reverse political or social progress.

Regressive Tax

A tax imposed in such a way that the tax rate decreases as the taxable amount increases, disproportionately affecting lower-income individuals.

Payroll Tax

Levies charged on employers or workers, typically based on a proportion of the wages that staff receive from their employers.