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Firms 1 and 2 Compete in a Cournot Duopoly

Question 18

Multiple Choice

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that,inadvertently,lowers firm 1's marginal cost:


A) firm 1's reaction function will shift up.
B) firm 2's reaction function will shift up.
C) firm 2's reaction function will shift down.
D) firm 1's reaction function will shift down.

Correct Answer:

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