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Question: problem 3 cournot competition and pricecost marginthe demand for a...

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Problem 3: Cournot Competition and Price-cost Margin.The demand for a product is Q=a−P/2. If there are 4 firms in an industry and marginal cost is MC= 20, then the price in Nash equilibrium is P= 56. What is a?

(P-MC)/P = 1/(n\mu )

where n is the number of firms, and μ is the absolute value of the elasticity of demand.

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