Several firms produce a similar product. Their customers\' locations are spread

Question

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