Suppose That Two Cournot Duopolists Serve the Peoria-Dubuque Route, and the Demand

question 17

Multiple Choice

suppose that two Cournot duopolists serve the Peoria-Dubuque route, and the demand curve for tickets per day is Q = 250 - 2p (so p = 125 - Q/2) .Total costs of running a flight on this route are 2,050 + 20q, where q is the number of passengers on the flight.Each flight has a capacity of 80 passengers.In Cournot equilibrium, each duopolist will run one flight per day and will make a daily profit of

• A)$1,025.
• B)$400.
• C)$250.
• D)$800.
• E)$3,850.

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Definitions:

Average Variable Cost

Represents the cost that varies with the level of output, calculated by dividing the variable costs by the quantity produced.

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit changes as production volume increases.

Maximum Capacity

The highest level of output or activity that a facility, system, or machine can achieve under normal conditions.

Capital

Economic resources that are used in the production of goods and services, including buildings, machinery, equipment, and financial assets.