Question

N firms, in a Cournot oligopoly are facing the market demand given by P = 140 – 0.4Q, where P is the market price and Q is the market quantity demanded. Each firm has (total) cost of production given by C(qi) = 200 + 10qi, where qi is the quantity produced by firm i (for i from 1 to N).

New firms would like to enter the market if they expect to make non-negative profits in this market; the existing firms would consider exiting the market if they are losing money (make negative profits). In the long run, we would expect that the number of the firms is such that none of them want to exit the market and no new firms would desire to enter the market.

Find 18. The long run equilibrium number of the firms in this oligopoly.

19. The long run equilibrium price in the Cournot oligopoly equilibrium.

20. Lerner Index in the long run Cournot oligopoly equilibrium.

21. Herfindahl-Hirschman Index in the long run Cournot oligopoly equilibrium (on 0 to 1 scale).

Answer 1