Consider an industry with N 2 firms producing a homogeneous product and competing in quantities. Firms...

 

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Consider an industry with N≥ 2 firms producing a homogeneous product and competing in quantities. Firms have constant marginal costs c> 0 and face the inverse demand function p= a-bQ, where Q=₁9; and q; is quantity produced by firm i. There are no fixed costs of production. i=1 qi (a) Solve for the Cournot equilibrium and write down expressions for equilibrium quantities, price and profits. (b) Write down expressions for equilibrium consumer surplus CS(N) and social welfare N W(N) = CS(N) + Ti (N) i=1 (c) Describe what happens to equilibrium firm output, industry output, profit, price, consumer surplus and social welfare as the number of firms N increases. Briefly discuss your findings. Consider an industry with N≥ 2 firms producing a homogeneous product and competing in quantities. Firms have constant marginal costs c> 0 and face the inverse demand function p= a-bQ, where Q=₁9; and q; is quantity produced by firm i. There are no fixed costs of production. i=1 qi (a) Solve for the Cournot equilibrium and write down expressions for equilibrium quantities, price and profits. (b) Write down expressions for equilibrium consumer surplus CS(N) and social welfare N W(N) = CS(N) + Ti (N) i=1 (c) Describe what happens to equilibrium firm output, industry output, profit, price, consumer surplus and social welfare as the number of firms N increases. Briefly discuss your findings.

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