1. The inverse market demand is given by p = 200 – .5Q where Q is the market output. The market has currently one large price-setting incumbent and 20 potential price-taking entrants. The total cost of the incumbent is TC(q) = 40q where q is the incumbent’s

| February 14, 2018

1. The inverse market demand is given by p = 200 – .5Q where Q is the market output. The market has currently one large price-setting incumbent and 20 potential price-taking entrants. The total cost of the incumbent is TC(q) = 40q where q is the incumbent’s output and the total cost of each potential entrant is TCe(qe) = 140qe + 5qe^ 2 where qe is the output of a potential entrant. These cost functions reflect the fact that the incumbent has access to superior technology. (a) Show th …

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