Multiple Choice
A decrease in firm 1's marginal cost will cause
A) a downward shift in firm 1's reaction function resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.
B) an upward shift in firm 1's reaction function resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
C) a downward shift is firm 2's reaction function resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
D) an upward shift in firm 2's reaction function resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.
Correct Answer:
Verified
Correct Answer:
Verified
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