If firms are in Cournot equilibrium,they could increase profits by:
A) jointly increasing output.
B) jointly reducing output.
C) unilaterally increasing prices.
D) unilaterally reducing prices.

Question

Quizplus · Accepted Answer

In Cournot equilibrium, firms are producing the quantity that maximizes their profits given the other firm's output. If one firm reduces its output, the other firm will increase its market share and profits. Therefore, jointly reducing output would result in higher profits for both firms. Alternatively, jointly increasing output would result in lower profits due to a decrease in market price. Unilaterally increasing or reducing prices would not be effective in increasing profits because the other firm's response is uncertain and could lead to a price war.

If Firms Are in Cournot Equilibrium,they Could Increase Profits By