In the Salop model the price for a firm in a symmetric equilibrium is p (n) = c + where C is the marginal cost, T is the transportation cost for is the distance between two neighbouring firms such that n is the number of firms in the industry. The zero profit condition that determines the consumers and n number of firms in a free entry equilibrium is (p (n) – c) - e = 0 where e is the exogenous sunk cost for a firm to enter the industry. Suppose T = 100 and 2 = 4. The number of firms in the free entry equilibrium is (numeric). --- -

In the Salop model the price for a firm in a symmetric equilibrium is p (n) = c + where C is the marginal cost, T is the transportation cost for is the distance between two neighbouring firms such that n is the number of firms in the industry. The zero profit condition that determines the consumers and n number of firms in a free entry equilibrium is (p (n) – c) - e = 0 where e is the exogenous sunk cost for a firm to enter the industry. Suppose T = 100 and 2 = 4. The number of firms in the free entry equilibrium is (numeric). --- -

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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