Questions 1 through 5 refer to the following scenario. Suppose three firms face the same total
market demand for their product. This demand is:
Suppose further that all three firms are selling their product for $60 and each has about one-third
of the total market.
What is the amount of total revenue each firm receives, in dollars?
Now assume that one of the firms, in an attempt to gain market share at the expense of the others,
drops its price to $50. The other two quickly follow suit. What is the amount of total revenue each
firm now receives, in dollars, rounded to the nearest dollar?
What impact has the price drop had on the revenue of each firm?
If the firms had all raised their prices to $70 instead of lowering price, what would be the amount
of total revenue each firm would have received, in dollars, rounded to the nearest dollar?