Several fims produce a similar product Their caustomers locations are spread out

Question

Several fims produce a similar product Their caustomers locations are spread out uniformly on a line from A to B. Every customer buys the productrom the firm closest to their location. The irm can be located on A, B,C or Donly, as shown in the figure The intervals AC, CD and DB are equal in length. If there were three firms an equilibrium location for the firmns would be one firm in A, one firm in C and one firm in D two firms in A and one firm in B O inexistent two firme in C and one im in D O one firm in A, one rm in C and one firm in B

Explanation / Answer

Solution: two firms in C and one firm in D

Explanation: Since there are three firms in equilibrium location- two firms in C and one firm in D.

2 equilibrium: Both in C

3 equilibrium: Two firms in C and one firm in D

4 equilibrium: Two firms in C, one firms in A, and one firms in B

5 equilibrium: Three firms in C, one firms in A, and one firms in B

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