Suppose that the demand function is Q s /p, where Q is the total quantity demanded, s is a measure of the size of the market, and p is the price of the homogeneous good. Let F be a firm’s fixed cost and m be its constant marginal cost. If n firms compete in a Cournot model, calculate the price, p, a typical firm’s output, q, and a typical firm’s profit, p.

b. If entry is free, what does n equal?

c. What happens to equilibrium concentration, 1, as s increases?

d. What happens to equilibrium firm size as s increases?

a. Prove that: i. p = m[1 + ii. q= n- m n iii. 7 sl E 1 and