In a Cournot equilibrium,each firm chooses an output level that
A)maximizes joint profits.
B)maximizes the price received.
C)maximizes profits given what the other firm produces.
D)maximizes revenue given what the other firm produces.

Question

Quizplus · Accepted Answer

In Cournot equilibrium, each firm chooses an output level that maximizes profits given what the other firm produces. Each firm takes the output of the other firm as given and maximizes its own profit function accordingly. This results in a Nash equilibrium where no firm has an incentive to change its output given the output of the other firm. Maximizing joint profits or maximizing price received may not be the best strategy for each individual firm in a competitive market setting.

In a Cournot Equilibrium,each Firm Chooses an Output Level That