A dominant firm with a competitive fringe.
Suppose that the market demand for oranges is Q = 1000 - 2P, where Q = n * Qf + Qd and Q is the total quantity, Qf is the quantity supplied by a single competitive fringe firm and Qd is the quantity demanded by the dominant firm. The dominant firm's marginal cost is given by mcd = 100, QD, and the competitive fringe's supply curve is given by Qf = -120 + P . There are three competitive fringe firms in the market.
3.1 Short-run fixed entry/exit
a. Calculate the dominant firm's residual demand, and marginal revenue of its residual demand. Plot them on the graph.
b. Calculate the equilibrium quantity and price set by the dominant firm. Also, calculate the equilibrium quantity supplied by each competitive fringe firm.
c. Now if we change the marginal cost for the dominant firm to be mcd = 50, redo the part (a) and (b) under this new marginal cost condition.
d. Now if we change the marginal cost for the dominant firm to be mcd = 150, redo the part (a) and (b) under this new marginal cost condition.
A dominant firm with a competitive fringe.
Suppose that the market demand for oranges is Q = 1000 - 2P, where Q = n * Qf + Qd and Q is the total quantity, Qf is the quantity supplied by a single competitive fringe firm and Qd is the quantity demanded by the dominant firm. The dominant firm's marginal cost is given by mcd = 100, QD, and the competitive fringe's supply curve is given by Qf = -120 + P . There are three competitive fringe firms in the market.
3.1 Short-run fixed entry/exit
a. Calculate the dominant firm's residual demand, and marginal revenue of its residual demand. Plot them on the graph.
b. Calculate the equilibrium quantity and price set by the dominant firm. Also, calculate the equilibrium quantity supplied by each competitive fringe firm.
c. Now if we change the marginal cost for the dominant firm to be mcd = 50, redo the part (a) and (b) under this new marginal cost condition.
d. Now if we change the marginal cost for the dominant firm to be mcd = 150, redo the part (a) and (b) under this new marginal cost condition.
Related textbook solutions
Related questions
Suppose that each firm in a competitive industry has the following costs:
Total Cost: TC=50+1/2 q2
Marginal Cost: MC=q
where q is an individual firm's quantity produced.
The market demand curve for this product is:
Demand QD=140-2P
where P is the price and Q is the total quantity of the good.
Each firm's fixed cost is $__________
What is each firm's variable cost?
_______ 50+1/2q
_______1/2q
_______q
_______1/2q2
Which of the following represents the equation for each firm's average total cost?
_____ 50/q
_______ 50/q+1/2q
_______1/2q
_______50+1/2q
Complete the following table by computing the marginal cost and average total cost for from 5 to 15.
| 5 | ||
| 6 | ||
| 7 | ||
| 8 | ||
| 9 | ||
| 10 | ||
| 11 | ||
| 12 | ||
| 13 | ||
| 14 | ||
| 15 |
The average total cost is at its minimum when the quantity each firm produces (q) iquals ________
Which of the following represents the equation for each firm's supply curve in the short run?
_______1/2q2
______q
_____50-q
_____120-1/2q2
In the long run, the firm will remain in the market and produce if________
Currently, there are 8 firms in the market.
In the short run, in which the number of firms is fixed, the equilibrium price is__________ In the short run, in which the number of firms is fixed, the equilibrium price is
________units. Each firm produces ________ nits. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)
In this equilibrium, each firm makes a profit of _______ . (Note: Enter a negative number if the firm is incurring a loss.)
Firms have an incentive to EXIT/ENTER the market.
In the long run, with free entry and exit, the equilibrium price is _______and the total quantity produced in the market is__________units. There are ________
firms in the market, with each firm producing _________units.
