4. In the dominant-firm price leadership model, the market demand, fringe supply, and marginal cost for...
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4. In the dominant-firm price leadership model, the market demand, fringe supply, and marginal cost for the dominant firm are given below. P = 190 Q P = 40 + 2qf MCd = 40 + ½qd a) Find the dominant firm's residual demand curve. b) Solve for the quantity and price the dominant firm will set. Also solve for the fringe firms' quantity supplied and the total quantity demanded in the market. c) Now suppose more firms enter, shifting the fringe supply curve to P = 40 + qf. Repeat parts a) and b). How does the quantity supplied change and price change for the dominant firm when more firms enter? Explain. d) Suppose the dominant firm can invest in new technology to reduce costs such that their new marginal cost curve would be MCd = 40 +qd. What would be the maximum amount the dominant firm will spend on this new technology? 4. In the dominant-firm price leadership model, the market demand, fringe supply, and marginal cost for the dominant firm are given below. P = 190 Q P = 40 + 2qf MCd = 40 + ½qd a) Find the dominant firm's residual demand curve. b) Solve for the quantity and price the dominant firm will set. Also solve for the fringe firms' quantity supplied and the total quantity demanded in the market. c) Now suppose more firms enter, shifting the fringe supply curve to P = 40 + qf. Repeat parts a) and b). How does the quantity supplied change and price change for the dominant firm when more firms enter? Explain. d) Suppose the dominant firm can invest in new technology to reduce costs such that their new marginal cost curve would be MCd = 40 +qd. What would be the maximum amount the dominant firm will spend on this new technology?
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ANSWER a The dominant firms residual demand curve is P 402qd b The dominant firm will set a quantity of qd 50 and a price of P 190 The fringe firms wi... View the full answer
Related Book For
Statistics for Business and Economics
ISBN: 978-0132930192
8th edition
Authors: Paul Newbold, William Carlson, Betty Thorne
Posted Date:
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