Firms operating under cournot competition or cournot market
Course:- Microeconomics
Reference No.:- EM1355

Assignment Help
Assignment Help >> Microeconomics

Question: Suppose three identical firms are engaged in Cournot competition in quantities. They all have marginal costs equal to 40.

Market demand is given by:

P(X) = 200 - X = 200 - (x1 + x2 + x3), where P denotes price, X total quantity demanded, and xi individual demand for firms i = 1,2, and 3.

a) Explain in what type of markets Cournot type competition can occur. Write down the demand curve and marginal revenue curve for firm 1.

b) What is the first order condition for profit maximization for firm 1? Compute the optimum quantity x1* for firm 1 as a function of quantities x2 and x3.

c) Since the firms are identical, symmetrical solutions exist also for the two other firms. Use this to compute the optimum quantity produced (and sold) for each firm.

d) Compute total demand, X, and market price, P. Compute each firm's profit, πi, and the sum total of all profits.


The details about three identical firms operating in Cournot competition are given. The demand curve with marginal revenue, profit maximization, optimum quantity, total demand and market price related questions are answered.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Microeconomics) Materials
Which scenario is the best from an economic standpoint? Are there any other considerations, such as environmental/health/social issues, which have impacted this option and t
If a good is non-rival and non-excludable, it will never be produced by the private sector (i.e., public sector intervention is required in order for a non-zero quantity of su
Your answer to (a) tells you how the future increase in the money supply affects the current expectation of the future exchange rate (the "expected future exchange rate," Ee
Explain the changes in interest rates, inflation, and unemployment rates that your research yielded. Explain one reason for each of the changes in interest rates, inflation,
Why is the Code of Ethics significant to your organization? How will your code apply to the international sales team? How will your organization balance performance-based ince
What effect do government intervention, taxation, and regulations have on economic behaviour? Describe. What are real-world examples of government intervention, regulations an
Explain briefly what English. Dutch, and sealed bid auctions are why the bidding strategies for English and 2' price sealed bid auctions differ from those for Dutch and 1" p
A certain engine lathe can be purchased for $390,000 and depreciated over three years to a zero salvage value with the SL method. This machine will produce metal parts that wi