A reaction curve shows how much a firm will produce as a function of how much it thinks its competitors will produce.
A reaction curve refers to a profit-maximizing, actions which a firm may undertake for any given action chosen by its competitor firm. Thus, profit-maximizing output of one firm in a duopoly gives the output of the other firm.
Firm two's reaction curve shows its output as a function of how much it thinks firm one will produce. In Cournot equilibrium, each firm correctly assumes the amount that its competitor will produce and thereby maximizes its own profits accordingly.
Hence, a reaction curve shows how much a firm will produce in comparison to its competitors.
To learn more about competitors here:
https://brainly.com/question/14752851
#SPJ4
