1) The profit maximizing output of the dominant firm is given by the equation
Q= QM -Qf = 600-3p -(p-120)
= 720-4p
or, p= 180-Q/4 .................(i)
Therefore, total revenue of the dominant firm is,
pQ= 180Q-Q2 /4
and marginal revenue of the dominant firm is
d(pQ)/dQ= 180-Q/2
Also cost function of the dominant firm is
TC= cQ=100Q (given c=100)
Therefore marginal cost of the dominant firm is
MC= 100
The profit maximizing condition of a firm is
MR=MC
or, 180-Q/2=100 or, Q =160
Therefore, the correct answer is (d)
2) The profit maximizing price of the dominant firm
Using eqtn (i) of part 1 we get,
p =180-Q/4 =180-160/4=140 which is also equilibrium market price of the product.
Therefore, the correct answer is b)
3) The market demand of the product at equilibrium market price of the product is
QM = 600-3p =600-3*140=180
Therefore, market share of the dominant firm for c=100 is
Market share = Profit maximizing output/market demand of the product*100= 160/180*100= 88.88%= 89% (Rounded to next whole integer)
Therefore, the correct answer is a)
4) From part 1) the profit maximizing condition of a firm is
180-Q/2=c
or, 180-0/2=c (As output of the dominant firm =0 )
or, c=180
Therefore, the correct answer is c)
PROBLEM I. Suppose that, in a market of a certain product, there is a single dominant...
PROBLEM I. Suppose that, in a market of a certain product, there is a single dominant firm with a cost function C(QcQ, where c > 0 is a constant, and the competitive fringe with a supply function Qf(p) = p-120 The market demand function is given by QM(p) = 600-3p. Q1. When c= 100, the dominant firm's profit-Inaximizing quantity is (a) 100 (b) 144 (c) 180 (d) 160 (e) 120 Q2. When c- 100, the equilibrium market price of the...
PROBLEM I. Suppose that, in a market of a certain product, there is a single dominant firm with a cost function CQ)-cQ, where c >0 is a constant, and the competitive fringe with a supply function Q'(p)p-120 The market demand function is given by QM(p) 600-3p Q1. When c 100, the dominant firm's profit-maximizing quantity is (a) 100. (b) 144 (c) 180 (d) 160. (e) 120 02. When c 100, the equilibriun market price of the product is (a) 120....
PROBLEM I. Suppose that, in a market of a certain product, there is a single dominant firm with a cost function C(Q)cQ, where c 0 is a constant, and the competitive fringe with a supply function Q(p)p-120. The market demand function is given by QM(P)-600-3p. Q4. Under what condition of c does the competitive fringe produce nothing at the equilibrium? (a) c 240. (b) c 90. (c) c 2 100. (d) 100 cS 40 (e) с 60.
PROBLEM II. In a market of a certain product, there is a monopolist with a cost function C(Q) = 2, while the inverse demand function is given by P)600 2Q. Compute the monopoly equilibrium quantity Qm and price Pm, Q3. The monopoly equilibrium quantity Q"is (a) Q 240 (b) Q60. (c) Q90. (dQ 180 (e) Qm 120 Q4. The monopoly equilibrium price Pm is (a) Pm 240 (b) Pm 220 (c) Pm 360 (d) Pm 420 (e) Pm 380 Q5....
PROBLEM II. In a market of a certain product, there is a monopolist with a cost function C(Q) = 2, while the inverse demand function is given by P)600 2Q. Compute the monopoly equilibrium quantity Qm and price Pm, Q3. The monopoly equilibrium quantity Q"is (a) Q 240 (b) Q60. c)Q 90. (d) Q,n= 180 (e) Q 120 Q4. The monopoly equilibrium price Pis (a) Pm 240 (b) P 220 (c) Pm 360 (d) P420 (e) Pm 380 Q5. The...
2. Consider a dominant firm in a market with a competitive fringe. The market demand curve is given by P = 100 − Q.The supply curve of the competitive fringe is perfectly elastic and given by P=Pf. The dominant firm has a marginal cost c where Pf > c (a) For what value of Pf is the presence of the competitive fringe binding on the dominant firm? (b) Suppose the dominant firm has c = 0 and the competitive fringe...
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