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Assignment:
Consider the market for widgets in a country with a population of 300 million. Demand is given by Q = (a - p)S, where a=50 and S is market size. Production technology is given by a cost function C = F + c q, where F = 1000, c = 20. Suppose the Cournot model provides a good description of the way firms compete. Finally, suppose there is a large number of potential competitors.
(a) Determine the free-entry equilibrium number of firms.
(b) Explain why the relation between market size and the number of firms is increasing but less than proportional.
(c) Explain why same industries operating in similar countries may have different market structures.
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