Question

consider an industry with three firms each having marginal costs equal to zero.the inverse demand curve facing this industry is: p(q1,q2,q3)=60 - (q1+q2+q3).
a) if each firm behaves as a cournot competitor, what is firm 1's best response function?
b) calculate cournot equilibrium of this problem
c) firms 2 and 3 decide to merge and form a single firm ( MC is still zero). calculate the new industry equilibrium and comment on combined profits from firms 2 and 3 considering pre and post merger profits.

Answer 1

C is correct ans. May be