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Ace Washtub Company is currently the sole producer of washtubs. Its cost function is C(q)=49+2q, and the market demand function is D(P)=100-P. There is a
Ace Washtub Company is currently the sole producer of washtubs. Its cost function is C(q)=49+2q, and the market demand function is D(P)=100-P. There is a large pool of potential entrants, each of which has the same cost function as Ace. Assume the Bain-Sylos postulate. Let the incumbent firm's output be denoted qI.
Suppose we now assume active firms expect to achieve a Cournot solution. Does entry depend on qI? Will there be entry?
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