In the Cournot Model of Quantity Competition, as the Number

question 36

Multiple Choice

In the Cournot model of quantity competition, as the number of firms increases:

• A) the total industry output declines asymptotically.
• B) the difference between price and marginal cost increases.
• C) price approaches average cost.
• D) the equilibrium price steadily increases.
• E) the price elasticity of demand for the product falls.

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Definitions:

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Compounded Annually

The process by which interest is calculated on an investment or loan annually, with each year's interest added to the principal.

Interest Rate

The percentage at which interest is charged or paid on a loan or investment over a specific period.