Question

In comparing the Cournot equilibrium with the competitive equilibrium,

a. both profit and output level are higher in Cournot.

b. both profit and output level are higher in the competitive equilibrium.

c. profit is higher, and output level is lower in the competitive equilibrium.

d. profit is higher, and output level is lower in Cournot.

Answer 1

Profit is higher, and output level is lower in Cournot.

Step-by-step explanation:

Cournot competition is a type of economic model which describes an industry setting whereby firms that produce the same product compete on the amount of product to manufacture.

This type of competition involves more than one firm in which each firm's output decision affects the price of the product in the market. In cournot equilibrum each firm decide on the quantity of products to produce inorder to maximise profit.