Suppose that Coke and Pepsi are the only two firms in the cola market. There is Cournot competition between the two firms. The marginal cost of making a bottle of cola is constant at $2/bottle. Now suppose that the marginal cost of making a bottle of cola increases to $4/bottle. In the new Cournot equilibrium, the quantity sold will be oooo greater for both firms. less for both firms. the same for both firms. unknown, since there is not enough information to answer.
Suppose that Coke and Pepsi are the only two firms in the cola market. There is Cournot competition between the two firms. The marginal cost of making a bottle of cola is constant at $2/bottle. Now suppose that the marginal cost of making a bottle of cola increases to $4/bottle. In the new Cournot equilibrium, the quantity sold will be oooo greater for both firms. less for both firms. the same for both firms. unknown, since there is not enough information to answer.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 1E
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Question
![With Cournot competition, oligopoly firms decide on the quantity to produce. There is an equilibrium, where
each firm chooses its production that is a best-response to the other firms' production levels. The equilibrium
quantity and price is in between the competitive and monopoly market outcomes.
To answer this question, you will want to use an appropriate graph on a piece of scratch paper. Otherwise,
you are just guessing.
Suppose that Coke and Pepsi are the only two firms in the cola market. There is Cournot competition
between the two firms. The marginal cost of making a bottle of cola is constant at $2/bottle. Now suppose
that the marginal cost of making a bottle of cola increases to $4/bottle. In the new Cournot equilibrium, the
quantity sold will be
greater for both firms.
less for both firms.
the same for both firms.
unknown, since there is not enough information to answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F46029127-96a5-4dc2-997a-3c090d1aab2d%2Feec9beb5-e53c-4348-8e2a-f90aee400de3%2Fwkdc48t_processed.png&w=3840&q=75)
Transcribed Image Text:With Cournot competition, oligopoly firms decide on the quantity to produce. There is an equilibrium, where
each firm chooses its production that is a best-response to the other firms' production levels. The equilibrium
quantity and price is in between the competitive and monopoly market outcomes.
To answer this question, you will want to use an appropriate graph on a piece of scratch paper. Otherwise,
you are just guessing.
Suppose that Coke and Pepsi are the only two firms in the cola market. There is Cournot competition
between the two firms. The marginal cost of making a bottle of cola is constant at $2/bottle. Now suppose
that the marginal cost of making a bottle of cola increases to $4/bottle. In the new Cournot equilibrium, the
quantity sold will be
greater for both firms.
less for both firms.
the same for both firms.
unknown, since there is not enough information to answer.
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