Two firms currently comprise the market for chicken sandwiches. One firm has been in the market for 50 years and has considerable market share. The other firm has been in the market for 25 years and is trying to erode the market share of the first firm. Below is the inverse demand function for the market. Each firm also faces marginal costs of $1.

P(Q) = $8 - 0.25Q

MC = $1

How much in profit will each firm earn? How much will the industry earn in profit Draw a supply and demand diagram for this market. How much is consumer and producer surplus in this market?

Answer rating: 100% (QA)

To determine the profit earned by each firm and the industry we first need to find the equilibrium quantity and price in the market This can be done by setting the market demand equal to the total qua... View the full answer