10.2 10.2. SINGLE MARKET. Suppose that two countries, initially in autarchy, decide to cre-ate a single market. For simplicity, assume that, in both economies, there is only oneproduct. Demand for this product is given by D₁ = Si (a-pi), (i=1,2), where S, is ameasure of country i's size. Upon the creation of a single market, total demand is givenby the horizontal sum of the two initial demands.Assuming there is free entry and that firms compete a la Cournot, determine theequilibrium number of firms in autarchy and after the completion of the single market.Interpret the results.10.3. CALIFORNIA AND MONTANA. The number of imported automobiles in California isfour times higher than in Montana, in per capita terms. The population of Californianis mainly urban, whereas the population of Montana is mainly rural. How do demo-graphic differences and the model presented in Section 10.1 explain the differences inconsumption patterns?2¹10.4. MARKET SIZE AND MARKET STRUCTURE. In some industries, the number of firmsincreases as market size increases. In other industries, the number of firms seemsremarkably stable despite changes in market size. Discuss.10.5. RETAIL IN SWITZERLAND. Retail in Switzerland is mostly dominated by highlyprofitable cartels. The Swiss authorities anticipate the gradual collapse of these cartelsas the country becomes better integrated with the rest of Europe. OECD, by contrast,hold a more sceptical view, claiming that the collapse of cartels does not necessarilylead to more competitive markets; rather, they add, cartel breakdowns are frequentlyassociated with an increase in concentration. Which prediction seems more reasonable?

The Cournot model is an economic model used to study the behavior of firms in an oligopoly market.…

a 10.2. SINGLE MARKET. Suppose that two countries, initially in autarchy, decide to cre- ate a single market. For simplicity, assume that, in both economies, there is only one product. Demand for this product is given by D₁ = Si (a-pi), (i=1,2), where S; is measure of country i's size. Upon the creation of a single market, total demand is given by the horizontal sum of the two initial demands. Assuming there is free entry and that firms compete a la Cournot, determine the equilibrium number of firms in autarchy and after the completion of the single market. Interpret the results.

a 10.2. SINGLE MARKET. Suppose that two countries, initially in autarchy, decide to cre- ate a single market. For simplicity, assume that, in both economies, there is only one product. Demand for this product is given by D₁ = Si (a-pi), (i=1,2), where S; is measure of country i's size. Upon the creation of a single market, total demand is given by the horizontal sum of the two initial demands. Assuming there is free entry and that firms compete a la Cournot, determine the equilibrium number of firms in autarchy and after the completion of the single market. Interpret the results.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.6P

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