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Homework answers / question archive / Three electricity generating firms are competing in the market with the inverse demand given by P(q) = 21 - Q

Three electricity generating firms are competing in the market with the inverse demand given by P(q) = 21 - Q. All firms have constant marginal costs. Firm 1's marginal cost is MC = 5; it has a capacity constraint of K2 = 5 units. Firm 2's marginal cost is MC = 8; it has a capacity constraint of K2 = 3 units. Firm 3's marginal cost is MC = 10; it has a capacity constraint of K = 3 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.