Cournot model to derive an equilibrum industry structure

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Reference no: EM131245939

We can use the Cournot model to derive an equilibrum industry structure. For this purpose, we will define an equilibrum as that structure in which no firm has an incentive to leave or enter the industry. If a firm leaves the industr. it enters an elternative competitive market in which case it earns zero (economic) profit. If an additional firm enters the industry when there are already n firms in it, the new frim's profit is determined by the Cournot equilibrum with n+1 firms. For this problem, assume that each firm has the cost function: C(q)=256+20q. Assume further that market demand is described by: P=100-Q

a. Find the long-run equilibrum number of firms in this industry

b. what industry output, price, and firm profit levels will characerize the long-run equilibrum?

Reference no: EM131245939

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