An industry has two firms. Firm 1's cost function is c(y) = 3y + 200 and firm 2's cost function is c(y) 3y + 100. The demand curve for the output of this industry is a downward-sloping straight line. In a Cournot equilibrium, where both firms produce positive amounts of output: = The firm with higher fixed costs produces more. Both firms produce the same amount of output. There is less output than there would be if the firms colluded to maximize joint profits. It is not possible to tell because the demand function is not specified. The firm with lower fixed costs produces more.

An industry has two firms. Firm 1's cost function is c(y) = 3y + 200 and firm 2's cost function is c(y) 3y + 100. The demand curve for the output of this industry is a downward-sloping straight line. In a Cournot equilibrium, where both firms produce positive amounts of output: = The firm with higher fixed costs produces more. Both firms produce the same amount of output. There is less output than there would be if the firms colluded to maximize joint profits. It is not possible to tell because the demand function is not specified. The firm with lower fixed costs produces more.

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter9: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 19SQ

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