9:48 Chegg Home Student question Expert Q&A My solutions Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(q)-q. The market demand is Q(P)-20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? Skip question Start Solving Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior) ||| = Exit Ĉ VPN LTE 2 4 C72 ا... €/QEOO Notifications Example: Dominant Firm Model with Capacity Option 1: Say we choose to eliminate the fringe firms . Then, QR = 20-2P -> P-10- Q/2. • But P=5.5 is not in the interior. Check the boundary points • -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36. Time Left: 00:08:53 • Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.
9:48 Chegg Home Student question Expert Q&A My solutions Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(q)-q. The market demand is Q(P)-20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? Skip question Start Solving Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior) ||| = Exit Ĉ VPN LTE 2 4 C72 ا... €/QEOO Notifications Example: Dominant Firm Model with Capacity Option 1: Say we choose to eliminate the fringe firms . Then, QR = 20-2P -> P-10- Q/2. • But P=5.5 is not in the interior. Check the boundary points • -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36. Time Left: 00:08:53 • Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(g) = 4g, their total capacity is K = 2 units. The dominant firm has TC(g). The market
Transcribed Image Text:9:48
Chegg Home
Student question
Expert Q&A My solutions
Example: Dominant Firm Model with Capacity
The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant
firm has TC(q)-q. The market demand is Q(P)-20-2P.
What is the fringe supply?
What is the profit maximizing price for the dominant firm?
Skip question
Start Solving
Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total
capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the
fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not
in the interior)
|||
=
Exit
Ĉ
VPN
LTE 2
4
C72 ا...
€/QEOO
Notifications
Example: Dominant Firm Model with Capacity
Option 1: Say we choose to eliminate the fringe firms
. Then, QR = 20-2P -> P-10- Q/2.
• But P=5.5 is not in the interior. Check the boundary points
• -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36.
Time Left: 00:08:53
• Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.
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