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An industry has three firms each of which produces output at a constant unit cost of...

An industry has three firms each of which produces output at a constant unit cost of $10 per unit. The demand function for the industry is q = 1,000-p.

  1. What is the Cournot equilibrium price and output for this industry?
  2. Suppose that there is a proposed merger between two firms in this industry and after the merger there are two firms left, what is the Cournot equilibrium price and output after the merger?
  3. What do the results tell us about the use of Cournot model to predict the effect of merger?

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Expert Solution

Rahul Sunny answered 1 year ago
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