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A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N...

A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N greater than or equal to 1 firms in this market, and the marginal cost for each firm i was a constant ci. Suppose firms in this market compete choosing the level of output, and marginal cost is the same across firms. ci=30. What will be the market price if N=4?

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Expert Solution

Cournot model with N firms with market demand P = A - BQ

Per firm quantity = (A - C)/(BN + B) , Market price = (A +NC)/(1 + N). Profit = (A - C)^2/(B(N + 1)^2)

When N = 4, A = 200 B = 1, C = 20, price= (200 + 4*30)/5 = $64

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Rahul Sunny answered 2 years ago
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