In the Cournot duopoly model,the reaction curve shows:
A)one firm's best possible price as a function of the profit of the other firm.
B)one firm's most possible profit as a function of the costs of the other firm.
C)one firm's best possible revenue as a function of the profit of the other firm.
D)one firm's most profitable output as a function of the output of the other firm.

Question

Quizplus · Accepted Answer

The reaction curve in the Cournot duopoly model shows one firm's most profitable output as a function of the output of the other firm. This is because in the Cournot model, each firm chooses its output level based on its belief about the output level of the other firm. The reaction curve represents the optimal output level for a firm given the output level of the other firm. Therefore, the correct answer is D.

In the Cournot Duopoly Model,the Reaction Curve Shows