Firms operating under cournot competition or cournot market
Course:- Microeconomics
Reference No.:- EM1358

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
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
The GDP deflator differs from the consumer price index in that the GDP deflator includes (Click to select)a small subset of productsall products produced in the economy and
For this project, complete an economic analysis of the firm you selected. Include the following: Behavior of the firm and the industry, Market structure, Global environment, R
A small airline recently sold to a private equity group for $145 million. The airline has earned profits of $9 million last year. The new managers believe they can grow prof
Compute the natural rate of unemployment. Does it depend on the way people form their expectations of inflation? 2. Discuss the way people form expectations of inflation is mo
For each of the following utility functions, draw the three indierence curves that correspond to the three stated utility levels, labeling each curve with the corresponding
When obama was campaiging for president in 2008 he proposed more government spending paid for with higher taxes on the rich. What impact would those options have on the equili
Use a class width of $250 to prepare a frequency distribution and a percent frequency. Prepare a histogram and comment on the shape of the distribution. What observation can y
Kidney cancer drug delays cancer progression for six months, with no known side effects. An estimated treatment cost is $54,000. What is the cost per Quality Adjusted Life Yea