Question

In the Cournot​ model, a firm maximizes profit by selecting A. its​ output, assuming that other firms keep their output constant. B. its​ price, assuming that other firms keep their price constant. C. its​ price, assuming that other firms will retaliate. D. its​ output, assuming that other firms will retaliate.

Answer 1

Answer: Option (A) is correct.

Explanation:

In a cournot model, a firm maximizes its profit by selecting a quantity of output that is to be produced and assumes that all the other firms are keeping their output level unchanged.

There is output war between the firms in a cournot model. In this type of market condition, there are more than one firm and all the firms in a market are producing homogeneous products rather than differentiated products.