In: Economics
Suppose the market demand is Q=100-P. You are asked to find out how this market operates under perfect competition, monopoly and oligopoly, with the same market demand and cost structure for each firm.
b. as compared with a. part, the price has increased due to more monopoly power. Monopolist is able to reduce the quantity still making higer profits.
c. Due to Cournot competition (quantity competition), market quantity has increased. But due to fall in prices, the overall profit has declined as compared with part b.
d. Competition between three firms will increase the quantity and decrease the price. The overall effect is increase in profit as compared to part c.