Question
Suppose demand for a good is linear with P=a-bQ where Q is total quantity consumed. Suppose that n identical Cournot-competitive firms have identical marginal cost
Suppose demand for a good is linear with P=a-bQ where Q is total quantity consumed. Suppose that n identical Cournot-competitive firms have identical marginal cost c, and that n of these firms are located in Consumerland while [1-]n of these firms are located in Producerland. Show graphically2 what would happen to total quantity consumed, producer profits, and consumer surplus if Consumerland was to offer a small subsidy of s per unit consumed in Consumerland.
Can anyone explain the scenario of the question? I am confused about why there is different firms in consumerland and producerland respectively.
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