# Image transcription text Problem 3. The market for a new carbohydrate-free strand of rice is served by three firms, AsiaRice, Ben’s Rice, and CountryRice (or

Image transcription text Problem 3. The market for a new carbohydrate-free strand of rice is served by
three firms, AsiaRice, Ben’s Rice, and CountryRice (or A, B, and C). These firms are
engaged in (simultaneous) Cournot competition. Total demand for a ton of carb-free
rice is described by P = 4000-Q, where Q is the total quantity produced by all firms
in the market. The three firms have an identical total cost function Ci(qi) = 400qi
for i = {a, b, c}.
1. Write AsiaRice’s profit as a function of the quantities produced by each firm
da, 9b, and qc?
2. What is the best response function of AsiaRice?
3. Suppose (for this part only) that Ben’s Rice faces a lower marginal cost of 200.
So it’s total cost function is Co(qb) = 200q . Would your answer to part 2
change? Why or why not?

(550 words)

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