Firms 1 and 2 compete in a Cournot duopoly. If firm 2 adopts a strategy that raises firm 1's marginal cost:
A. firm 2 will enjoy higher profits.
B. firm 1 will reduce its output.
C. firm 2 will gain market share.
D. All of the statements associated with this question are correct.
Answer: D
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Innovation and incentives to come up with new products and production methods are stifled in larger markets
Indicate whether the statement is true or false
Which of the following is not an example of a cost externality?
A) the dumping of industrial waste into a lake B) unsightly billboards C) a neighbor that blasts his stereo system D) the building of a new type of jet fighter bomber E) All of the above
In a debate on the state of the economy Senator X pointed out that the unemployment rates for teenagers, blacks, and hispanics had increased over the last year, while Senator Y stated that the unemployment rate in the United States was at its lowest level in more than 30 years. In this example, aggregate data is being used by:
A. both senators. B. Senator X. C. neither senators. D. Senator Y.
An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is:
A. unit elastic. B. inelastic. C. elastic. D. perfectly elastic.