3. In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3Q^2. Calculating the market price under each of the 5 scenarios below, rank/order the Consumer Surplus in each scenario (don’t calculate each CS; just rank them); (i)They compete in quantities with each other (Cournot-Nash equilibrium) (ii)They collude as though they are all plants of the same single multi-plant monopoly. (iii) B and C act as two plants of a single multi-plant monopoly “B+C”, which competes in quantities (Cournot competition) against A. (iv) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model (v)They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the “market supply” for the competitive market.
3. In a market with
(i)They compete in quantities with each other (Cournot-Nash equilibrium)
(ii)They collude as though they are all plants of the same single multi-plant
(iii) B and C act as two plants of a single multi-plant monopoly “B+C”, which competes in quantities (Cournot competition) against A.
(iv) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model
(v)They act as
Step by step
Solved in 8 steps with 10 images
