-The above figure shows the reaction functions for two pizza shops in a small isolated town.Firm B producing 100 pizzas and firm A producing 50 pizzas is not a Cournot equilibrium because

Question

Quizplus · Accepted Answer

In a Cournot equilibrium, each firm chooses its quantity to maximize its profit given the quantity chosen by the other firm. If firm B is producing 100 pizzas while firm A is producing 50, and this situation is not a Cournot equilibrium, it implies that at least one firm could adjust its output to achieve a higher profit given the output of the other firm. The correct answer is that firm B is not on its best-response function, meaning firm B could adjust its output to increase its profit given firm A's output of 50 pizzas.

-The Above Figure Shows the Reaction Functions for Two Pizza