Three electricity generating firms are competing in the market with the inverse demand given by P(Q) = 20 - Q. All%3Dfirms have constant marginal costs. Firm 1's marginal cost is MC = 5; it has a capacity constraint of K1 = 5 units.Firm 2's marginal cost is MC = 8; it has a capacity constraint of K2 = 2.5 units. Firm 3's marginal cost is MC = 10; it%3Dhas a capacity constraint of K3 = 2.5 units.A. The three firms compete in the style of Cournot. Please compute the Nash equilibrium quantities. Also computethe price in the Nash equilibrium.B. Which of these firms would have produced a larger quantity if it had a larger capacity? Please explain.

Firm1: π= (20-q1- q2-q3)q1 - 5q1 Best response curve: 20 - 2q1 - q2- q3 - 5 =0 15 - q2- q32= q1_[1]…

Three electricity generating firms are competing in the market with the inverse demand given by P(Q) = 20 -Q. All firms have constant marginal costs. Firm 1's marginal cost is MC = 5; it has a capacity constraint of K1 = 5 units. Firm 2's marginal cost is MC = 8; it has a capacity constraint of K2 = 2.5 units. Firm 3's marginal cost is MC = 10; it has a capacity constraint of K3 = 2.5 units. A. The three firms compete in the style of Cournot. Please compute the Nash equilibrium quantities. Also compute the price in the Nash equilibrium. B. Which of these firms would have produced a larger quantity if it had a larger capacity? Please explain.

Three electricity generating firms are competing in the market with the inverse demand given by P(Q) = 20 -Q. All firms have constant marginal costs. Firm 1's marginal cost is MC = 5; it has a capacity constraint of K1 = 5 units. Firm 2's marginal cost is MC = 8; it has a capacity constraint of K2 = 2.5 units. Firm 3's marginal cost is MC = 10; it has a capacity constraint of K3 = 2.5 units. A. The three firms compete in the style of Cournot. Please compute the Nash equilibrium quantities. Also compute the price in the Nash equilibrium. B. Which of these firms would have produced a larger quantity if it had a larger capacity? Please explain.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter24: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 13CQ

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