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Question 3: Consider a market with mN identical consumers with aggregate demand function D(p)=mpa with a>0 and nN identical firms with cost functions c(y)=b+1by(b+1)/b where
Question 3: Consider a market with mN identical consumers with aggregate demand function D(p)=mpa with a>0 and nN identical firms with cost functions c(y)=b+1by(b+1)/b where b>0. 1. Find the perfectly competitive equilibrium for the market. Suppose a>1 and n=1 so there is one firm that is a monopolist. 2. Find the monopoly equilibrium for the market. Compare monopoly and perfect competition, both with a>1 and n=1. Suppose a=1 and n=2 and there is Cournot competition in the market. 3. State the problem of firm j{1,2} and find the first-order condition. 4. Suppose the two firms produce the same in the Cournot equilibrium and find it. Compare Cournot and perfect competition, both with a=1 and n=2. Question 3: Consider a market with mN identical consumers with aggregate demand function D(p)=mpa with a>0 and nN identical firms with cost functions c(y)=b+1by(b+1)/b where b>0. 1. Find the perfectly competitive equilibrium for the market. Suppose a>1 and n=1 so there is one firm that is a monopolist. 2. Find the monopoly equilibrium for the market. Compare monopoly and perfect competition, both with a>1 and n=1. Suppose a=1 and n=2 and there is Cournot competition in the market. 3. State the problem of firm j{1,2} and find the first-order condition. 4. Suppose the two firms produce the same in the Cournot equilibrium and find it. Compare Cournot and perfect competition, both with a=1 and n=2
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