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Vitek1552 [10]
3 years ago
15

We can use the Cournot model to derive an equilibrium industry structure. For this purpose, we will define an equilibrium as tha

t structure in which no firm has an incentive to leave or enter the industry. If a firm leaves the industry, it enters an alternative competitive market in which case it earns zero (economic) profit. If an additional firm enters the industry when there are already n firms in it, the new firm's profit is determined by the Cournot equilibrium with n + 1 firms. For this problem, assume that each firm has the cost function: C(q) = 256 +20_q. Assume further that market demand is described by: P = 100 - Q. a. Find the long-run equilibrium number of firms in this industry. b. What industry output, price, and firm profit levels will characterize the long-run equilibrium?
Business
1 answer:
Nina [5.8K]3 years ago
5 0

Answer:

a. long run equilibrium numbers of firms in the industry are 4

b. Output of each firm will be 16

Explanation:

Under cournot’s equilibrium, the cost function of an individual firm is written as:

C(q) = F + cq

In our case, C(q) is given as

C(q) = 256 + 20q

Therefore, F = 256 and c = 20

At the same time, the demand function is written as:

P(Q) = a - bQ

In our case, P is given as

P = 100 – Q

Therefore, a = 100, b =1

a. Long run equilibrium number of firms in the industry

N = ((a-c)/(bF)^0.5) – 1

N = ((100-20)/(1*256)^0.5) – 1

N = (80/16) – 1 = 4

Therefore, long run equilibrium numbers of firms in the industry are 4

b. Output of each firm will be q = (a-c)/b*(1+N) = (100-20)/1*(1+4) = 80/5 = 16

Therefore, total output of industry is 16*4 = 64

Price = 100-64 = 36

Profit = Revenue – Cost

Revenue of each firm = Price * Output = 36*16 = 576

Cost = 256+20*16 = 576

Therefore, profit = 0

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Answer:

d. The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the right

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I hope my answer helps you

5 0
3 years ago
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Answer:

The correct answer is option (b) Little capital

Explanation:

Solution

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4 0
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Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (
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Answer:

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Implicit costs are simply the opportunity costs. An opportunity cost is the cost of the next more valuable alternative when faced with two or more options. No money is paid for this costs. The implicit costs for Christine were the $40,000 that she not receive as wages if she had continued working at a real state firm.

8 0
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The debt to owners' equity ratio is a common type of liquidity ratio
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Answer:

Original Cost of asset = $269,000

Explanation:

Provided information,

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$16,000 = $162,000 - Book Value

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