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Homework answers / question archive / In a Cournot oligopoly with N-number of firms and identical marginal costs, if the number of firms decreases because firms exit, the markup of price over cost will _____
In a Cournot oligopoly with N-number of firms and identical marginal costs, if the number of firms decreases because firms exit, the markup of price over cost will _____.
In Cournot oligopoly is a type of oligopoly market where the sellers in the market are selling identical products. All the sellers are aware of the pricing and other strategies of the competitor seller. The sellers restrict the quantity of output that can be manufactured by each of them. The sellers are supposed to follow the restriction in the manufacturing quantity and abide by it. With the exit of sellers in the market, there will be no change in the prices of the commodities instead the remaining sellers can increase the quantity that they manufacture. The prices will not change because if one firm increases the prices other firms will not follow and the original firm will end up losing market share.