In the Salop model the price for a firm in a symmetric equilibrium is p (n) = c + where C is the marginal cost, T is the transportation cost for is the distance between two neighbouring firms such that n is the number of firms in the industry. The zero profit condition that determines the consumers and n number of firms in a free entry equilibrium is (p (n) – c) - e = 0 where e is the exogenous sunk cost for a firm to enter the industry. Suppose T = 100 and 2 = 4. The number of firms in the free entry equilibrium is (numeric). --- -

In the Salop model the price for a firm in a symmetric equilibrium is p (n) = c + where C is the marginal cost, T is the transportation cost for is the distance between two neighbouring firms such that n is the number of firms in the industry. The zero profit condition that determines the consumers and n number of firms in a free entry equilibrium is (p (n) – c) - e = 0 where e is the exogenous sunk cost for a firm to enter the industry. Suppose T = 100 and 2 = 4. The number of firms in the free entry equilibrium is (numeric). --- -

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter24: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 9CQ

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