A new firm enters a market which is initially serviced by a Cournot duopoly charging a price of $10. What will the new market price be should the three firms coexist after the entry?
A) $10
B) Below $10
C) Above $10
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

In a Cournot competition, the entry of a new firm increases the total quantity supplied in the market, leading to a decrease in the market price.

A New Firm Enters a Market Which Is Initially Serviced