There is one firm with a marginal cost of 0. It's monopoly price is 10. Another firm enters, also with zero marginal cost. Using the Cournot model, would would the new oligopoly price be?

Can this question be answered without more information about the demand for the product? If not, then assume a elasticity of demand of 0.2.

I am trying to make a very simple model what happens when a new firm enters the market for a prescription drug. That's why elasticity of demand is low, if you're sick price doesn't matter too much.

Now that I think about it, you do have to know the elasticity of demand. Sorry, should have thought that through a bit more.

To determine the new oligopoly price using the Cournot model, we need to consider the market structure and the elasticity of demand. In this case, assuming an elasticity of demand of 0.2, we can proceed with the calculation.

The Cournot model assumes that firms compete by choosing quantities, taking into account the quantities produced by other firms. In this case, we have two firms competing.

To find the new oligopoly price, we need to follow these steps:

1. Start by determining the total quantity that the monopolist produces at the monopoly price. Since the marginal cost for each firm is 0, the monopolist's quantity will be the quantity demanded at the monopoly price.

2. With the entry of a new firm, it will take away some market share from the existing firm. So, each firm's new quantity will be influenced by the other firm's behavior. Apply the Cournot reaction function to determine the new quantities.

3. Calculate the total quantity produced by both firms. This will give you the market quantity.

4. Use the demand elasticity and market quantity to determine the oligopoly price. The formula for calculating the price elasticity of demand is:

Elasticity of demand = (% change in quantity demanded) / (% change in price)

Rearranging the formula, we get:

% change in price = (% change in quantity demanded) / (elasticity of demand)

Since the marginal cost is zero and the firms set their quantities to maximize their profits, the market price will be equal to the marginal cost of the last firm that enters the market.

Therefore, the oligopoly price would be the marginal cost of the last firm that enters the market.

Please note that without specific information about the demand curve or the elasticity of demand, the calculations provided above are based on assumptions and general principles of the Cournot model. In order to obtain a more precise answer, it would be necessary to have more specific information about the demand curve, such as a demand function or a demand schedule.