### Question 2: Monopolistic Competitive Industry AnalysisConsider a monopolistically competitive industry with four firms producing the same good. The (inverse) demand function for the good is given by:\[ p = 30 - Q \]where $ Q $ is the total quantity of the good produced by the firms: $ Q = \sum_{i=1}^{4} q_i $. Each firm selects its output $ q_i $ to maximize profits. The cost of producing $ q $ units of output is identical for all firms, defined as:\[ C(q_i) = 6q_i \quad \text{for all } i = 1, \ldots, 4. \]**(a) Analysis of Output Choice:**If all four firms choose their outputs simultaneously (i.e., under the Cournot model), determine the profit-maximizing outputs for each firm. [Note: The firms are identical and encounter the same demand curve, leading to a symmetric model.] This problem involves finding the Nash equilibrium in quantities, where each firm's output decision affects the market price and consequently, the profits of all firms in the industry.

In a Cournot competition model with identical firms, each firm chooses its output to maximize…

Consider a monopolistic competitive industry with 4 firms producing the same good. The (inverse) demand for the good is given as: p=30-Q where is total units of the good produced by the firms: Q =q₁. Each firm chooses their output q; to maximize profits. The cost of producing q units of output is the same for all firms: C(q) = 6qi for all i = 1, ..., 4. (a) Suppose all 4 firms choose their outputs at the same time (i.c., Cournot model), what will be the profit-maximizing outputs for each firm. [Note: Firms are iden- tical and face the same demand curve, hence model is symmetric]

Consider a monopolistic competitive industry with 4 firms producing the same good. The (inverse) demand for the good is given as: p=30-Q where is total units of the good produced by the firms: Q =q₁. Each firm chooses their output q; to maximize profits. The cost of producing q units of output is the same for all firms: C(q) = 6qi for all i = 1, ..., 4. (a) Suppose all 4 firms choose their outputs at the same time (i.c., Cournot model), what will be the profit-maximizing outputs for each firm. [Note: Firms are iden- tical and face the same demand curve, hence model is symmetric]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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