Consider a market for which aggregate inverse demand is ? = ? − ?? and total...

Consider a market for which aggregate inverse demand is ? = ? − ?? and total cost for each firm is ??(?) = ?? where ?, ? and ? are positive constants.

a. Derive the equilibrium values ? ∗ and ? ∗ if the market is characterized by perfect competition.

b. Derive the equilibrium values ? ? and ? ? if the market is characterized by monopoly.

c. Derive the equilibrium values ? ? and ? ? if the market is characterized by an ?-firm Cournot oligopoly.

d. Show that the Cournot oligopolistic outcome, in terms of ? and ?, coincides with the monopolistic outcome when ? = 1 and approaches the perfectly competitive outcome when ? → ∞.

Expert Solution

Rahul Sunny answered 6 months ago

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