N firms compete in a Cournot oligopoly. Each firm can produce at a constant average and...

N firms compete in a Cournot oligopoly. Each firm can produce at a constant average and marginal cost of AT C = MC = $5. Firms face a market demand demand curve given by Q = 53 − P. Where Q is the market quantity demanded with Q = Q1 + Q2 + .........QN 1. Find each firm’s reaction function taking into account that the firms are identical. 2. Calculate the Cournot-Nash equilibrium. What are the resulting market price and profits of each firm? 3. Show that as N becomes large, the market price approaches the price that would prevail under perfect competition. Hint: your answers will be functions of N.

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Rahul Sunny answered 1 year ago

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