Author Question: In choosing the optimal output, the monopolist had only to consider its own costs and the demand ... (Read 38 times)

Kikoku · **on:** Jun 29, 2018

In choosing the optimal output, the monopolist had only to consider its own costs and the demand curve that it faced. How do things change under duopoly and what does the Cournot model argue about how firms will behave?

What will be an ideal response?

Question 2

Explain the influences on the pace of labor productivity growth.

What will be an ideal response?

fur · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The duopolist has another factor to consider: how much output will its rival produce? The more the rival produces, the less market is left for the other firm in the duopoly. In the Cournot model, each firm looks at the market demand, subtracts what it expects the rival firm to produce, and chooses its output to maximize its profits based on the market that is left.

Answer to Question 2

Once the preconditions for growth are in place, the sources of labor productivity growth are: physical capital growth, human capital growth, and advances in technology. All of these activities enable an economy to grow and they all increase labor productivity. They all also interact: human capital creates new technologies, which are then embodied in both new human capital and new physical capital. Similarly advances in technology also lead to increases in labor productivity.