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3. A Cournot model describes competition among 2, 3, 4, or 5 firms with equal marginal costs and equal fixed cost. Inverse demand curve: Q
3. A Cournot model describes competition among 2, 3, 4, or 5 firms with equal marginal costs and equal fixed cost.
Inverse demand curve: Q = 100 P
Constant marginal cost: MC = $30
Constant fixed cost = $70
For each level of entry (2, 3, 4, or 5 firms):
a. What is the price?
b. What is the output produced by each firm?
c. What is each firms profit?
d. What is each firms average cost?
e. At what level of entry do firms become unprofitable?
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