The Cournot theory of oligopoly is based on the assumption that each firm believes that rivals will:
A) keep their output constant if it changes its output.
B) increase their output whenever it increases its output.
C) decrease their output whenever it increases its output.
D) randomly change output whenever it changes its output.

Question

Quizplus · Accepted Answer

The Cournot theory assumes that each firm believes its rivals will keep their output constant if it changes its output. This assumption is based on the idea that firms are strategic and take into account the potential reactions of their competitors when making production decisions. In other words, each firm assumes that its rivals will not change its output in response to a change in its own output.

The Cournot Theory of Oligopoly Is Based on the Assumption