The main assumption of the Cournot model:
A)is more plausible the larger the number of firms in the industry.
B)is that each firm takes the other firm's price as given.
C)is not valid once equilibrium is established in the market.
D)takes into account the reactions of other firms.

Question

Quizplus · Accepted Answer

The Cournot model assumes that firms choose quantities rather than prices and that each firm takes the other firm's quantity as given, which becomes more plausible as the number of firms in the industry increases, making it harder for any one firm to affect the market outcome significantly.

The Main Assumption of the Cournot Model