Consider a market in which three firms compete as quantity setters (i.e. firms are engaged in Cournot competition), and the market demand curve is given by Q= 6,000-10P. All firms have constant marginal cost equal to 100. In equilibrium, quantity supplied by each firm and the price are: Q-5000 and P-100 Q-1000 and P-200 Q=2500 and P = 225 Q=1250 and P = 225

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Consider a market in which three firms compete as quantity setters (i.e. firms are engaged in Cournot competition), and the market demand curve is given by Q=
6,000-10P. All firms have constant marginal cost equal to 100. In equilibrium, quantity supplied by each firm and the price are:
Q-5000 and P = 100
Q=1000 and P = 200
Q=2500 and P = 225
Q=1250 and P = 225
Widget
Widget is a commodity that is traded in a perfectly competitive global
market that consists of many small price-taking firms. The firms fall in three
categories with the following characteristics:
Number of
firms
Type 1
Type 2
Type 3
100
100
50
Capacity of
firm's plant
(units per
year)
120 units
100 units
100 units
AVC ($ per
unit)
20
30
30
Fixed cost
per unit at
full capacity
($/unit)
25
35
50
• Assume that each firm's AVC is constant up to the capacity of its plant.
Further, assume that once built, a firm's plant has zero redeployment
value. Finally, assume that a typical entrant has a cost structure
identical to the Type 1 firms and that there are many potential
entrants. Investment cost of a Type 1 firm is 15000 and annual interest
rate is 8%.
• The demand for widgets is Q-35000-200P, where P is $ per unit and
Q is measured in units per year.
The short-run equilibrium price in the world widgets market is
Type your answer...
The short-run equilibrium quantity in the world widgets market is
Type your answer...
D
-1
In the short-run equilibrium:
The combined equilibrium quantity of widgets supplied by Type 1 firms is
Transcribed Image Text:- 1 2 3 4 5 6 7 8 9 10 Consider a market in which three firms compete as quantity setters (i.e. firms are engaged in Cournot competition), and the market demand curve is given by Q= 6,000-10P. All firms have constant marginal cost equal to 100. In equilibrium, quantity supplied by each firm and the price are: Q-5000 and P = 100 Q=1000 and P = 200 Q=2500 and P = 225 Q=1250 and P = 225 Widget Widget is a commodity that is traded in a perfectly competitive global market that consists of many small price-taking firms. The firms fall in three categories with the following characteristics: Number of firms Type 1 Type 2 Type 3 100 100 50 Capacity of firm's plant (units per year) 120 units 100 units 100 units AVC ($ per unit) 20 30 30 Fixed cost per unit at full capacity ($/unit) 25 35 50 • Assume that each firm's AVC is constant up to the capacity of its plant. Further, assume that once built, a firm's plant has zero redeployment value. Finally, assume that a typical entrant has a cost structure identical to the Type 1 firms and that there are many potential entrants. Investment cost of a Type 1 firm is 15000 and annual interest rate is 8%. • The demand for widgets is Q-35000-200P, where P is $ per unit and Q is measured in units per year. The short-run equilibrium price in the world widgets market is Type your answer... The short-run equilibrium quantity in the world widgets market is Type your answer... D -1 In the short-run equilibrium: The combined equilibrium quantity of widgets supplied by Type 1 firms is
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