Examine Figure 8-12 to see that competitive firm C is not producing at all. Explain the reason why the profit maximizing output level for firm C is at q, = 0. What would happen to total industry cost of production if firm C produced 1 unit while firm B produced 1 less unit than the competitive output level?
Say that firm C is a mom-and-pop grocery store. Why would chain grocery stores A and B drive C out of business? How do you feel about keeping C in business?
What would be the economic impact of legislation that divided the market into three equal parts between the mom-and-pop store and chain stores A and B?