Equilibrium quantity and price set by the dominant firm

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Reference no: EM131238043

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 supply by the dominant firms. 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.

Long Run Free Entry/Exit

In the long run, there is free entry and exit for the competitive fringe firms. 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.

Reference no: EM131238043

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