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 init, 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? b. What will be increase in per-firm profit, if all the firms (from your answer in (a))joined a cartel? c. If one of the firms (from the cartel in (b)) wanted to deviate from the cartel arrangement, i. what output should it set? ii. what will be the increase/decrease in its profits as a result of the deviation?
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