Asked by marah shabib on Jun 14, 2024
Verified
The inverse demand function for fuzzy dice is p 20 q.There are constant returns to scale in this industry with unit costs of $8.Which of the following sets of statements is completely true?
A) Monopoly output is 6.Cournot duopoly total output is 8.A Stackelberg leader's output is 8.
B) Monopoly output is 8.Cournot duopoly total output is 8.A Stackelberg leader's output is 8.
C) Monopoly output is 6.Cournot duopoly total output is 6.A Stackelberg follower's output is 3.
D) Monopoly output is 6.Cournot duopoly total output is 8.A Stackelberg follower's output is 3.
E) Monopoly output is 6.Cournot duopoly total output is 8.A Stackelberg follower's output is 4.
Inverse Demand Function
A mathematical representation that expresses price as a function of quantity demanded, illustrating how price can influence the quantity of a good that consumers are willing to buy.
Stackelberg Leader
In economic theory, a firm in a duopoly that sets its output level first, influencing the subsequent decision of another firm.
Cournot Duopoly
A Cournot Duopoly is a market structure where two companies control the entire market for a particular product or service, and each firm chooses its output level assuming that the other firm's decision is fixed.
- Understand the principles of the Stackelberg leadership model and its effects on market behavior.
- Ascertain equilibria across various structures of oligopolistic markets, like those found in Cournot and Stackelberg scenarios.
- Examine the strategic dynamics among companies within duopoly frameworks.
Verified Answer
BB
Bukky BakareJun 19, 2024
Final Answer :
D
Explanation :
The inverse demand function suggests that as quantity increases, price decreases. In a monopoly, the firm will produce where marginal revenue equals marginal cost, which is typically less than the competitive output. In a Cournot duopoly, firms choose quantities simultaneously, leading to a total output higher than monopoly but less than perfect competition. A Stackelberg leader produces more than in Cournot, anticipating the follower's response, which leads to a higher total output. However, the follower produces less than in the Cournot case. Given the unit cost of $8, the correct outputs align with the dynamics of each market structure described, making option D the correct set of statements.
Learning Objectives
- Understand the principles of the Stackelberg leadership model and its effects on market behavior.
- Ascertain equilibria across various structures of oligopolistic markets, like those found in Cournot and Stackelberg scenarios.
- Examine the strategic dynamics among companies within duopoly frameworks.