Asked by
Aminah Barrett
on Oct 14, 2024
Verified
Suppose that the duopolists Carl and Simon face a demand function for pumpkins of Q 1,800 400P, 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 $.50 for each pumpkin produced.If Carl believes that Simon is going to produce Qs 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 RC (Qs)
A) 1,800 400Qs.
B) 1,800 800Qs.
C) 800 Qs/2.
D) 400 Qs/2.
E) 1,200 Qs.
Reaction Function
A formula or model that predicts how a firm will change its output in response to changes in prices, outputs, or strategies of other firms.
Demand Function
A mathematical expression that shows the relationship between the quantity demanded of a good and its determining factors, such as price and income.
Marginal Cost
The climb in cumulative cost associated with the crafting of one more unit of a product or service.
- Compute the stable output for firms involved in a Cournot duopoly scenario.
- Implement the principles of the Cournot model in diverse market situations and demand functions.
- Gain an understanding of reaction functions and the way they direct business production strategies.
Verified Answer
IT
Learning Objectives
- Compute the stable output for firms involved in a Cournot duopoly scenario.
- Implement the principles of the Cournot model in diverse market situations and demand functions.
- Gain an understanding of reaction functions and the way they direct business production strategies.