An essential assumption of the Cournot model is that each firm aims to maximize profits, based on the expectation that its own output decision will not have an effect on the decisions of its rivals. Critically evaluate this assumption
What will be an ideal response?
The assumption is a problem on two fronts. First, no firm can reasonably be expected to know what the amount of output that a rival firm is going to produce in advance without some kind of collusion. Second the assumption that the firm's own output will not have an effect on the decision of its rivals appears naïve.
You might also like to view...
Convexity of indifference curves imply that consumers are willing to
A) give up more "y" to get an extra "x" the more "x" they have. B) give up more "y" to get an extra "x" the less "x" they have. C) settle for less of both "x" and "y". D) acquire more "x" only if they do not have to give up any "y".
Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will
a. place downward pressure on the prices of healthcare services. b. lead to higher healthcare prices. c. increase the incentive of consumers to economize on their purchases of healthcare services. d. increase the incentive of healthcare providers to provide their services at economical prices.