If there are firms in a Cournot equilibrium, and = + + + is the industry output, then the marginal revenue equals marginal cost condition for firm is:

+ =

3 Londons orbital motorway (the M25) is 117 miles and has about 25,000 breakdowns per year, but in this house we like round numbers.

We can factor out () multiply the second term by / to get: [+ ] =

[ + ] = ||

Defining / as (firm s share of the marketplace) gives: [+ ]=

||/

1. a) What is the interpretation of the last equation when is very close to 1?

2. b) What is the interpretation of the last equation when is very close to 0?

3. c) If there are identical firms, show that || > / and give intuition for this expression.