(9) Suppose the market for tennis shoes has one dominant firm and five fringe firms. The market demand is Q = 400 – 2P. The dominant firm has a constant marginal cost of 20. The fringe firms each have a marginal cost of MC= 20 + 5q. a. Verify that the total supply curve for the five fringe firms is Q, = P– 20. b. Find the dominant firm's demand curve. c. Find the profit-maximizing quantity produced and price charged by the dominant firm, and the quantity produced and price charged by each of the fringe firms. d. Suppose there are ten fringe firms instead of five. How does this change your results?
(9) Suppose the market for tennis shoes has one dominant firm and five fringe firms. The market demand is Q = 400 – 2P. The dominant firm has a constant marginal cost of 20. The fringe firms each have a marginal cost of MC= 20 + 5q. a. Verify that the total supply curve for the five fringe firms is Q, = P– 20. b. Find the dominant firm's demand curve. c. Find the profit-maximizing quantity produced and price charged by the dominant firm, and the quantity produced and price charged by each of the fringe firms. d. Suppose there are ten fringe firms instead of five. How does this change your results?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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a and b
Transcribed Image Text:(9) Suppose the market for tennis shoes has one dominant firm and five fringe firms.
The market demand is Q = 400 – 2P. The dominant firm has a constant marginal
cost of 20. The fringe firms each have a marginal cost of MC= 20 + 5q.
%3D
a. Verify that the total supply curve for the five fringe firms is Q, = P- 20.
b. Find the dominant firm's demand curve.
c. Find the profit-maximizing quantity produced and price charged by the
dominant firm, and the quantity produced and price charged by each of the fringe
firms.
d. Suppose there are ten fringe firms instead of five. How does this change your
results?
e. Suppose there continue to be five fringe firms but that each manages to reduce
its marginal cost to MC= 20 + 2q. How does this change your results?
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