In the Cournot model, a firm maximizes profit by selecting A. its output, assuming that other firms keep their output constant. B. its price, assuming that other firms keep their price constant. C. its price, assuming that other firms will retaliate. D. its output, assuming that other firms will retaliate.

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Business

Chandler Peterson

11 October, 15:03

In the Cournot model, a firm maximizes profit by selecting A. its output, assuming that other firms keep their output constant. B. its price, assuming that other firms keep their price constant. C. its price, assuming that other firms will retaliate. D. its output, assuming that other firms will retaliate.

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Answers (1)

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Raphael · Answer 1

Answer: Option (A) is correct.

Explanation:

In a cournot model, a firm maximizes its profit by selecting a quantity of output that is to be produced and assumes that all the other firms are keeping their output level unchanged.

There is output war between the firms in a cournot model. In this type of market condition, there are more than one firm and all the firms in a market are producing homogeneous products rather than differentiated products.