Explain why the intersection of the best-response functions is the Cournot equilibrium
What will be an ideal response?
On a best-response function, a firm selects the profit-maximizing level of output given the level of output it believes the other firm will produce. At the intersection of the best-response functions, what one firm believes the other firm will produce actually is the amount the other firm produces. Thus, neither firm has an incentive to change the level of output.
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A singer would willingly perform in a concert for $100,000. If she is paid $500,000 for the concert, she is
A) receiving $500,000 to cover her opportunity cost. B) not being paid her full opportunity cost. C) receiving $400,000 of economic rent. D) certainly being paid more than warranted by the level of demand.
The natural level of output is the level of output that occurs when
A) the goods market and financial markets are in equilibrium. B) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations. C) the markup (m) is zero. D) the unemployment rate is zero. E) there are no discouraged workers in the economy.