A perfectly competitive market is in equilibrium and 100,000 units are being produced. If three firms take over this market and a Cournot oligopoly is formed, what is the new total equilibrium quantity produced?

Question

Quizplus · Accepted Answer

In a Cournot oligopoly, each firm produces a quantity that maximizes its profit, taking into account the output of its rivals. In equilibrium, the total quantity produced is less than the quantity produced in a perfectly competitive market, as each firm has an incentive to reduce its output in order to increase its price. In this case, the new total equilibrium quantity produced is 75,000 units.

A Perfectly Competitive Market Is in Equilibrium and 100,000 Units