Question: Let Q = S[1/2n - 2(P - AP)] be the demand for a firm product in a monopolistic competition market, where P is the firm's
Let Q = S[1/2n - 2(P - AP)] be the demand for a firm product in a monopolistic competition market, where P is the firm's price, AP is average price in the industry and n is the number of firms in the industry. Suppose S = 720 is Home market size; S = 1280 is Foreign market size. Suppose firms are symmetric and each has a total cost C = 10 + 2Q. The equilibrium numbers of firms at Home under autarchy, at Foreign under autarchy and in the world under free trade are: A. n = 2, n = 3, n = 4 B. n = 3, n = 4, n = 5 C. n = 2, n = 4, n = 5 D. n = 4, n = 5, n = 9
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