Why is it difficult to contemplate an equilibrium

Reference no: EM131253545

1. (a) Suppose that firms in this industry maximize their sales revenue, taking prices as given, subject to constraint that profits must be nonnegative. What is the equilibrium in this industry if there are precisely six firms?

(b) What would be the equilibrium if three of the six firms were profit maximizers and three maximized revenue?

(c) Now suppose that all firms are revenue maximizers, taking prices as given, subject to a zero-profit constraint. Why is it difficult to contemplate an equilibrium in a case where there is free entry?

2. Suppose that the industry has six firms, each of which seeks to maximize its use of capital, subject to a zero-profit constraint (Firms continue to be price-takers.) What is the equilibrium in this case?

Reference no: EM131253545

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