1
answer
0
watching
106
views
17 Apr 2018
Suppose that the demand function is Q= s/p, where Q is the total quantity demanded, s is a measure of the size of the market, and p is the price of the homogeneous good. Let F be a firm's fixed cost and m be its constant marginal cost. If n firms compete in a Cournot model, calculate the price, p, a typical firm's output, q, and a typical firm's profit, pi.
a) Prove that:
i) p= m{1+ 1/n-1}
ii) q= (s/m)(n-1/n^2), and
iii) pi = s/n^2 minus F.
b) If entry is free, what does n equal?
c)What happens to equilibrium concentration, 1/n, as s increases?
d)What happens to equilibrium firm size as s increases?
Suppose that the demand function is Q= s/p, where Q is the total quantity demanded, s is a measure of the size of the market, and p is the price of the homogeneous good. Let F be a firm's fixed cost and m be its constant marginal cost. If n firms compete in a Cournot model, calculate the price, p, a typical firm's output, q, and a typical firm's profit, pi.
a) Prove that:
i) p= m{1+ 1/n-1}
ii) q= (s/m)(n-1/n^2), and
iii) pi = s/n^2 minus F.
b) If entry is free, what does n equal?
c)What happens to equilibrium concentration, 1/n, as s increases?
d)What happens to equilibrium firm size as s increases?
Reid WolffLv2
19 Apr 2018
