Homework SourseRequires calculus In the model of a dominant firm assume th
(Requires calculus) In the model of a dominant firm , assume that the fringe supply curve is given by Q = -1 +0.2P, where P is marketprice and Q is output.
Demand is given by Q = 11 - P.
What will price and outputbe if there is no dominantfirm? Now assume that there is a dominant firm, whose marginal costis constant at $6. Derive the residualdemand curvethat it facesand calculate its profit-maximizing output and price.
What would the answer be??
Demand is given by Q = 11 - P.
What will price and outputbe if there is no dominantfirm? Now assume that there is a dominant firm, whose marginal costis constant at $6. Derive the residualdemand curvethat it facesand calculate its profit-maximizing output and price.
What would the answer be??
Solution
Demand = supply 11 - P = -1 + 0.2P 12 = 1.2P P = 10 price = 10 output = 1 dC/dQ = 6 dC = 6dQ C = 6Q.
