QUESTION 5 points Several firms produce a similar product. Their customers\' loc

Question

QUESTION 5 points Several firms produce a similar product. Their customers' locations are spread out uniformly on a line from A to B. Every customer buys the product from the firm closest to their location. The firm can be located on A, B or C as shown in the figure: A- where the distance between A and C is the same as the distance between C and B. If there are four firms, the equilibrium in firm's location is: Hinl: For each of the oplions below, you can check if for the proposed location configuration, a firm has an oplimal devialion. If it is so, then that is not an equilibrium one firm in A, one in B and two in C two firms in A and two in B two firms in C and either two firms in A or two firms in B All four firms in A or all four firms in B

Explanation / Answer

Given the above conditions the equlibrium in the firm's location will be two firms in A and two firms in B. In this both location the firms can maximize their profit as the distance of C to B and C to A will be same.

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