Question: 4 Suppose that the market demand function is given by: as in Section 6.1.1. Each firm has zero fixed costs and constant marginal cost of

4 Suppose that the market demand function is given by:

as in Section 6.1.1. Each firm has zero fixed costs and constant marginal cost of production

c. An increase in demand causes the demand function to shift upwards, reflected by an increase in the parameter a to ã >

a. What effect does this have on each firm’s reaction function, and the Cournot equilibrium?

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