Price is set in a market by a dominant firm price leader (L = Leader). Total Market Demand is P = 10,000-5*QT.QT= 2,000 - .20*P.The dominant firm’s total cost is TCL= 50*QL + 1.5*QL2. The dominant firm’s Quantity Demanded is QL= QT – QF. The competitive fringe supply isSF= PL = 50 + 2QF;QF = -25 + .5*P.Profit maximizing price set by the dominant firm will be

Given:P = 10,000-5*QT QT= 2,000 - 0.20*PThe dominant firm’s total cost is TCL= 50*QL + 1.5*QL2The dominant firm’s Quantity Demanded is QL= QT – QF. The competitive fringe supply is SF= PL = 50 + 2QF QF = -25 + .5*PQL=QT-QFQL=(2,000-0.20*P)-(-25+0.5*P)QL=2,000-0.20*P+25-0.5*PQL=2025-0.70*PNow,SL=PL=50 + 2QFSL=50+2(-25+0.5*P)SL=50-50+PSL=PProfit maximizing price set by the dominant firm will be:QL=SL2025-0.70*P=P2025=P+0.70P1.7P=2025P=20251.7P=1191.18

Answered: Price is set in a market by a dominant…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Price is set in a market by a dominant firm price leader (L = Leader).
Total Market Demand is
P = 10,000-5*Q_T.
Q_T= 2,000 - .20*P.
The dominant firm’s total cost is
TC_L= 50*Q_L + 1.5*Q_L².
The dominant firm’s Quantity Demanded is
Q_L= Q_T – Q_F.
The competitive fringe supply is
S_F= P_L = 50 + 2Q_F;
Q_F= -25 + .5*P.
Profit maximizing price set by the dominant firm will be

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