Problem
Consider a homogeneous-good Cournot oligopoly with n ≥ 2 identical firms with cost C(x) = 0 and inverse demand P(X) = e-X.
a. Find a firm's best-response function, the Cournot equilibrium output, price, and profit. What type of equilibrium is this?
b. Find all the merger sizes m (2 ≤ m ≤ n) that are profitable to the merged entity. Are these mergers also profitable to the nonmerging firms?
c. Give an economic intuition, and compare it to the case of linear demand.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.