Suppose that in a perfectly competitive industry the equilibrium industry quantity is 10,000 units.Suppose that the monopoly output is 5,000.For a 2-firm Cournot Oligopoly (N =2)known as a duopoly,what is a likely Cournot QUANTITY for the industry?
A) 3,000 units
B) 5,000 units
C) 6,667 units
D) 10,000 units
E) 15,000 units

Question

Quizplus · Accepted Answer

In a duopoly, the total output of the two firms will be less than the industry output in perfect competition, but greater than the output of a monopoly. Therefore, it is likely that the Cournot quantity for the industry will be between the monopoly output of 5,000 units and the perfect competition output of 10,000 units. One way to calculate the Cournot quantity for a duopoly is to find the intersection of the reaction functions of the two firms. Without knowing the specific demand and cost functions, it is difficult to calculate the exact Cournot quantity. However, based on the given information, it is likely that the Cournot quantity for the industry will be closer to the competitive equilibrium of 10,000 units than the monopoly output of 5,000 units. Therefore, the most likely answer is C) 6,667 units, which is halfway between the monopoly output and the perfect competition output.

Suppose That in a Perfectly Competitive Industry the Equilibrium Industry