Two firms sell 100% orange juice in 10 ounce bottles.The juice is only good for one week.The two firms have contracts for all the oranges produced in a large geographic area.Each firm decides how many bottles of juice to produce at the same time.This market is best described with a

Question

Quizplus · Accepted Answer

The Cournot model is appropriate for this scenario as both firms make production decisions simultaneously, taking into account the output decisions of their competitor. Each firm has contracts for all the oranges produced in the area, indicating they have some degree of market power. The fact that the juice is only good for one week also suggests that the market is not perfectly competitive. Therefore, the Cournot model, where firms choose their production quantities based on their expectation of how their competitor will react, is the most appropriate model to study this market.

Two Firms Sell 100% Orange Juice in 10 Ounce Bottles