An essential assumption of the Cournot model is that each firm aims to maximize profits, based on the expectation that its own output decision will not have an effect on the decisions of its rivals. Critically evaluate this assumption
What will be an ideal response?
The assumption is a problem on two fronts. First, no firm can reasonably be expected to know what the amount of output that a rival firm is going to produce in advance without some kind of collusion. Second the assumption that the firm's own output will not have an effect on the decision of its rivals appears naïve.
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The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is
A. 7%. B. 3%. C. 6%. D. 5%.
Which of the following can be a solution to the "free riding problem" by discount retailers?
a. Awarding retailers exclusive territories b. Setting minimum prices for items sold by such specialty retailers c. All of the above d. None of the above
What is the profit maximization point for a firm in a purely competitive environment?
a. The output where P = MC b. The output where P < MC c. The output where P > MC d. The output where MR = MC e. The output where AVC < P
Major League Baseball teams are similar to other firms in that they use factors of production to produce a product (baseball games). An example of capital used by teams to produce their products is
A) the ballparks where the games are played. B) the labor of baseball players. C) the money teams earn from television contracts and ticket sales. D) the land on which baseball games are played.