In the Cournot model, when a new firm begins production it assumes its demand curve is
A) the market demand less the amount the other firm is selling.
B) the market demand plus the amount the other firm is selling.
C) the same as the competing firm's demand curve.
D) one-half of the competing firm's demand curve.

Question

Quizplus · Accepted Answer

In the Cournot model, each firm assumes that its demand curve is the market demand minus the quantity produced by the other firm(s). This is because each firm takes into account the output of its competitors when deciding how much to produce, assuming that the competitors' output levels will remain constant.

In the Cournot Model, When a New Firm Begins Production