The Cournot equilibrium can be found by treating ________ as a pair of simultaneous equations and by finding the combination of Q1 and Q2 that satisfy both equations.
A) the reaction curves for firms 1 and 2
B) the market supply curve and the market demand curve
C) the contract curve and the market demand curve
D) the contract curve and the market supply curve
E) the firm's supply curve and the firm's demand curve

Question

Quizplus · Accepted Answer

The Cournot equilibrium is a model of oligopoly in which competing firms choose a quantity to produce independently of each other. Each firm’s profit depends on its own output and the output of its competitors. By treating the reaction curves for firms 1 and 2 as a pair of simultaneous equations, we can find the combination of Q1 and Q2 that satisfy both equations, which represents the Cournot equilibrium. The other choices mentioned, such as market demand and supply curves, or contract curves, are not directly relevant to the Cournot equilibrium model.

The Cournot Equilibrium Can Be Found by Treating ________ as a Pair