Homework Answers
If the market demand function be: P = a - bQ where Q = q1 + q2 + q3 +......qn where n: number of firms, and
Marginal cost = c (constant), then
Equilibrium quantity (Q) = [n x (a - c)] / [b x (n + 1)]
Since a, b, c > 0, as n increases, (n + 1) increases by a higher amount and so, denominator of above expression increases more than proportionately than the numerator. Therefore, Q decreases as n increases.
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