Question

Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is −2.0. The marginal cost of producing the product is constant at $75, while average total cost at current production levels is $140.

Determine your optimal per unit price if:

Instructions: Enter your responses rounded to two decimal places.

a. you are a monopolist.

$



b. you compete against one other firm in a Cournot oligopoly.


$


c. you compete against 19 other firms in a Cournot oligopoly.


$

Answer 1

c. Cournot oligopoly (20 firms):

The optimal per unit price for a Cournot oligopoly with 20 firms is $485.10.

Explanation: