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Question: Why did Antoine Cournot assume this!?
According to Antoine Augustin Cournot, someone in the business world would not produce the maximum output that could be sold, even if costs of producing such outputs were zero!.!.!.

Does anyone know why!? I believe it ties into his Theory of Monopoly but I'm unsure how to explain it!.!.!.Www@QuestionHome@Com


Best Answer - Chosen by Asker:
Cournot was the first economist to analyse monopoly in detail although he made mistakes in his mathematics which were uncovered 40 years after he was writing!.

He concluded that a monopolist would produce such a quantity that there would always be a shortage in the market place!. In other words, the monopolist would create an excess of demand by fixing supply quantities below demanded quantities!. By this means the market price would be high and profit could be raised!.

Cournot was the first to analyse the maximum profit hypothesis but was unable to generate the full marginal analysis because he refused to accept the utility theory of demand!. As a result, he could not draw a demand curve relating price to quantity demanded and therefore could not derive the marginal revenue!.

All he could conclude was that the monopolist should restrict output to create a shortage even if production costs were very low or even zero!. Www@QuestionHome@Com