In the Cournot model, the curve that traces out the relationship between the market price and a firm's quantity when rival firms hold their outputs fixed is called ______________
A) Reaction function
B) Best response
C) Residual demand curve
D) Cournot equilibrium

Question

Quizplus · Accepted Answer

The curve that traces out the relationship between the market price and a firm's quantity when rival firms hold their outputs fixed is called the residual demand curve in the Cournot model. The reaction function refers to the optimal output choice of a firm given the output choices of all other firms in the market, while the best response refers to the optimal output choice of a firm given a specific output choice of a rival firm. The Cournot equilibrium refers to the quantity output of each firm in a market where each firm maximizes its profit based on its assumption about how other firms will react to its output choice.

In the Cournot Model, the Curve That Traces Out the Relationship