Reference no: EM132498126

Let the demand for hand-blown glass vases be given by q = 70000 - 2000P, where q is the quantity of glass vases consumed per year and P is the dollar price of a vase. Suppose that there are 1000 identical small sellers of these glass vases. The marginal cost function of such a seller is MC(q) = q + 5, where q is the firm's output. a. Assuming that each small seller acts as a price taker in this market derive the market supply curve, and the equilibrium price and quantity traded. b. Suppose that a new mechanized technique of producing vases is discovered and monopolized by some rm, call it rm B for "BIG." Using this technique, vases can be produced at a constant average and marginal cost of $15 per vase. Consumers cannot tell the difference between vases produced by the old and the new technique. Given the existence of the fringe of small sellers what is the demand curve facing rm B? c. Facing this demand curve, what is the profit-maximizing quantity produced by rm B? What is the price that it sets and the overall amount of vases traded in the market?