There are two firms in an industry with demand P=130-Q. Both firms have a constant marginal...

There are two firms in an industry with demand P=130-Q. Both firms have a constant marginal cost of production equal to $40.

a) If there are no fixed costs what will be the Cournot equilibrium levels of output for each firm?

(b) In part a), what is the market price and the profit for each individual firm?

(c) If the fixed cost is instead $1300 for each firm and there is entry and exit in the market, how many firms will be in the market, and what is the industry level of output?

Expert Solution

Rahul Sunny answered 2 years ago

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