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Assume there are 3-firms with the same individual demand function. This function is Q = 1,000 - 40P. Assume each firm has a different cost function. These functions are:

Firm 1: 4,000 + 5Q
Firm 2: 3,000 + 5Q
Firm 3: 3,000 + 7Q

a) What price should each firm charge if it wants to maximize its profit (or minimize its loss)?
b) Explain why the answer to the preceding question indicates that two of the firms should charge the same price and the third should charge a higher price?
c) Which firms will be most vulnerable to a price war? Explain

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9293736

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