In a Cournot duopoly, a residual demand curve:
A)is the same as a market demand curve.
B)represents the demand curve that one firm faces given the output choice of the other firm.
C)is the same as a marginal revenue curve when determining output in the Cournot model.
D)is steeper than the market demand curve.

Question

Quizplus · Accepted Answer

A residual demand curve represents the demand curve that one firm faces given the output choice of the other firm in a duopoly. It is derived by subtracting the output of one firm from the total market demand. It is not the same as a market demand curve, as it only reflects the demand faced by one firm. It is also different from a marginal revenue curve because it takes into account the output choice of the other firm. There is no information given to suggest that it is steeper than the market demand curve. A residual demand curve represents the demand curve that one firm faces given the output choice of the other firm. It is derived by subtracting the other firm's quantity from the market demand curve. Therefore, it is different from the market demand curve and steeper than the marginal revenue curve in the Cournot model.

In a Cournot Duopoly, a Residual Demand Curve