Suppose that two countries, initially in autarchy, decide to create a single market for only one...
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Suppose that two countries, initially in autarchy, decide to create a single market for only one product. Demand for this product is given by Q(p) = 21 - p in country 1, and by Q(p) = 42-2p in country 2. With the creation of the single market for this product, the total demand in the unified market will be given by the horizontal sum of the two demands: Q(p) = (21-p) + (42 - 2p) = 63-3p. Assume that there is free entry, all firms in both countries have the same cost function TC(q) = 4 + q, and firms compete in the style of Cournot. Please compute the equilibrium number of firms, the equilibrium price, the consumer surplus, and total profits in autarchy and after the completion of the single market. Interpret the results. Suppose that two countries, initially in autarchy, decide to create a single market for only one product. Demand for this product is given by Q(p) = 21 - p in country 1, and by Q(p) = 42-2p in country 2. With the creation of the single market for this product, the total demand in the unified market will be given by the horizontal sum of the two demands: Q(p) = (21-p) + (42 - 2p) = 63-3p. Assume that there is free entry, all firms in both countries have the same cost function TC(q) = 4 + q, and firms compete in the style of Cournot. Please compute the equilibrium number of firms, the equilibrium price, the consumer surplus, and total profits in autarchy and after the completion of the single market. Interpret the results.
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Autarchy Country 1 Demand Q1p 21 p Marginal Revenue MR1 21 2p TR1 p21 p Number of firms n1 ... View the full answer
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