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    Question

    In a Cournot duopoly, if one firm increases its output,

    how does the other firm typically respond?
    A Increases its output Correct Answer Incorrect Answer
    B Decreases its output Correct Answer Incorrect Answer
    C Keeps its output constant Correct Answer Incorrect Answer
    D Exits the market Correct Answer Incorrect Answer

    Solution

    In a Cournot duopoly, if one firm increases its output, the other firm typically decreases its output to maximize its profit, given the increased total market supply. If the other firm will not decrease the output then there is be excess supply in the market.

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