Calculate the equilibrium price and firm output

Reference no: EM13965229

1. All firms in a Cournot monopolistically competitive industry have the same cost function C(q) = 25 + 40q. Market demand is Q(p) = 140 - p. Calculate the equilibrium price, firm output, total output, and number of firms in the industry.

2. One of these firms is considering opening up a new product line, in a market in which it would be the only firm. So, adjusting the notation to now capture demand in the monopolistically competitive industry with Q₁(p₁) = 140 - p₁, and the demand it would face in the new second market with Q₂(p₂) = 100 - 2p₂, what should the firm do? Assume that the firm faces costs equal to C(q₁, q₂) = 25 + 40q₁ + 0.5q₂² + q₁q₂.

Reference no: EM13965229

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