Consider the following Cournot Duopoly diagram...

1. At what point is the Cournot equilibrium achieved?

a) E

b) D

c) C

d) B

2. Which isoprofit curve yields the highest level of profits for firm 1?

a) Isoprofit Curve 0

b) All isoprofit curves maintain the same level of profits

c) Both a) and b)

3. There is an increase in firm 1's marginal cost. How does this affect firm 1's reaction function?

a) Pivots along Q1

b) Shifts outward

c) Shifts inward

d) Does not move

4. There is a decline in firm 1's marginal cost. How does this affect firm 1's reaction function?

a) Pivots along Q1

b) Shifts outward

c) Shifts inward

d) Does not move

5. There is an increase in firm 1's marginal cost. Which of the following statements is correct?

a) Firm 1's output decreases and Firm 2's output decreases

b) Firm 1's output decreases and Firm 2's output increases

c) Firm 1's output increases and Firm 2's output decreases

d) Firm 1's output increases and Firm 2's output increases

6. There is a decline in firm 1's marginal cost. Which of the following statements is correct?

a) Firm 1's output decreases and Firm 2's output decreases

b) Firm 1's output decreases and Firm 2's output increases

c) Firm 1's output increases and Firm 2's output decreases

d) Firm 1's output increases and Firm 2's output increases

Firm 1 Reaction Function Isprofit curves for firm 1