Suppose that there is “dominant” firm with total cost function of c(q) = 100 + 10q...

Suppose that there is “dominant” firm with total cost function of c(q) = 100 + 10q + 0.25q². It faces a market demand function (inverse) of p = 100 − 0.5Q, where Q indicates total market supply. This dominant firm has to deal with 10 fringe firms, each of whom behaves perfectly competitively. Each fringe firm has a marginal cost function dc(q)/dq = 20q + 25
a) Calculate the supply function of the fringe firms
b) Using this, calculate the residual demand function of the dominant firm.
c) Derive the marginal revenue function of the dominant firm.
d) Find the profit-maximizing price of the dominant firm.
e) How much does the competitive fringe supply to the market?

Expert Solution

Rahul Sunny answered 2 years ago

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