Explain why the intersection of the best-response functions is the Cournot equilibrium
What will be an ideal response?
On a best-response function, a firm selects the profit-maximizing level of output given the level of output it believes the other firm will produce. At the intersection of the best-response functions, what one firm believes the other firm will produce actually is the amount the other firm produces. Thus, neither firm has an incentive to change the level of output.
You might also like to view...
What is marginal factor cost? How is it related to the supply curve of an input?
What will be an ideal response?
The maximum price a buyer is willing to pay for a good is called: a. cost
b. willingness to pay. c. equity. d. efficiency.
In any economy functioning at potential GDP, there are occasions when the short-term aggregate supply curve unexpectedly shifts, causing inflationary pressures. Which of the following is considered to be a common cause of this type of shift?
A. overoptimistic lending by banks B. sudden rise in input prices C. a surge of export sales D. a wave of government spending
In 1914, Henry Ford increased his workers’ wages from $3 to $5 per day and succeeded in increasing his profits. Which of the following principles was he demonstrating?
a. efficiency wage b. relative price c. natural rate of unemployment d. potential output