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Consider an oligopoly in which the inverse function p(?xi) = a - b ?xi, a, b > 0, and each firm's costs c(xi) = cxi, 0 < c < a. First, given n, determine the Cournot-Nash equilibrium outputs, profits, deviation of price from marginal cost, and deadweight loss. Then prove that all of these approach zero asymptotically as n tends towards infinity. Comment on the significance of these results.

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Solution Summary

The solution calculates the profit and equilibrium of oligopolistic competition with infinitely many firms.

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