Question

If a Cournot duopolist announced that it will double its output A. the other firm will double output also. B. the other firm does not view the announcement as credible. C. the other firm will shut down. D. it becomes the leader.

Answer 1

B) the other firm does not view the announcement as credible

Step-by-step explanation:

The reason is that the other firm thinks that the announcing firm will make losses as it will not be able to sell the products in an imperfect market where both the firms have identical cost functions and knew all about the cost. So increasing the production when the demand is the same will decrease the price of the product and result in increased losses to the announcing company.