L. Consider the situation of two firms in the same industry and operating in the same mar- ket. Firm A controls over 70% of the annual sales in the market. Firm B shares the remaining oughly 30% of annual sales with three other firms which also compete in this market Firm
L. Consider the situation of two firms in the same industry and operating in the same mar- ket. Firm A controls over 70% of the annual sales in the market. Firm B shares the remaining oughly 30% of annual sales with three other firms which also compete in this market Firm
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 11PA: Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2...
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![e. At the profit maximizing level of output and sales (Q), what is the degree of operating
leverage of each firm?
Firm A
Firm B](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd7b3a5a8-62f8-422a-9e49-23846b36685e%2Fffcd1f96-cfe0-4443-8432-7a820ce33afa%2Fplliyyi9_processed.png&w=3840&q=75)
Transcribed Image Text:e. At the profit maximizing level of output and sales (Q), what is the degree of operating
leverage of each firm?
Firm A
Firm B
![4
1. Consider the situation of two firms in the same industry and operating in the same mar-
5 ket. Firm A controls over 70% of the annual sales in the market. Firm B shares the remaining
roughly 30% of annual sales with three other firms which also compete in this market. Firm
7 B's share of annual sales averages about 7%. Both firms seek to maximize profit.
6
8
9 Firm A's monthly demand function and total cost function are as follows:
10
11 Demand Q = 20,000 - 100P
12
13 Firm B's total cost function is
14
19 (1) Perfect competition
20
Cost
15
16
17 a. What is the market structure in which these firms are competing (select one with "x")?
18
21 (2) Monopolistic competition
22
23 (3) Oligopoly--dominant price leadership
24
TC = 30,000 + 80Q+0.02Q^2
25 (4) Oligolopoly--barometric price leadership
26
27 b. What will be the amount of Firm A's monthly profit?
28
29 c. What will be the amount of Firm B's monthly profit?
30](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd7b3a5a8-62f8-422a-9e49-23846b36685e%2Fffcd1f96-cfe0-4443-8432-7a820ce33afa%2Fxvrfn2_processed.png&w=3840&q=75)
Transcribed Image Text:4
1. Consider the situation of two firms in the same industry and operating in the same mar-
5 ket. Firm A controls over 70% of the annual sales in the market. Firm B shares the remaining
roughly 30% of annual sales with three other firms which also compete in this market. Firm
7 B's share of annual sales averages about 7%. Both firms seek to maximize profit.
6
8
9 Firm A's monthly demand function and total cost function are as follows:
10
11 Demand Q = 20,000 - 100P
12
13 Firm B's total cost function is
14
19 (1) Perfect competition
20
Cost
15
16
17 a. What is the market structure in which these firms are competing (select one with "x")?
18
21 (2) Monopolistic competition
22
23 (3) Oligopoly--dominant price leadership
24
TC = 30,000 + 80Q+0.02Q^2
25 (4) Oligolopoly--barometric price leadership
26
27 b. What will be the amount of Firm A's monthly profit?
28
29 c. What will be the amount of Firm B's monthly profit?
30
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