Consider now a Cournot model with linear demand and identical firms that is scaled by market...

 

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Consider now a Cournot model with linear demand and identical firms that is scaled by market size M. In this model, Q (P) = M(D — P) and TC(Q) = cQ + F, with D = 6, c = 2, and F = 2. a) Compute how many firms would exist in the industry for M = 2,4,6,8. b) What if F 2,2.5,3,3.5 for the above 4 values of M respectively. Then, how many firms would exist in the industry for each value of M? c) Provide one example of an industry in which it is reasonable to think of F as variant, while M grows. Provide one example of an industry in which it is reasonable to think of F as growing with M. Consider now a Cournot model with linear demand and identical firms that is scaled by market size M. In this model, Q (P) = M(D — P) and TC(Q) = cQ + F, with D = 6, c = 2, and F = 2. a) Compute how many firms would exist in the industry for M = 2,4,6,8. b) What if F 2,2.5,3,3.5 for the above 4 values of M respectively. Then, how many firms would exist in the industry for each value of M? c) Provide one example of an industry in which it is reasonable to think of F as variant, while M grows. Provide one example of an industry in which it is reasonable to think of F as growing with M.

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a Number of Firms for Different M Given the Cournot model with linear demand we have QP MD P and TCQ ... View the full answer