QM = 140,000 -32,000P marker Quantity demanded. QF = 60,000+ 8,000P, where QM = market quantity demanded, and QF = the supply of the competitive fringe. Quantities are measured in gallons per week, and price is measured as a price per gallon. a. Determine the price and output that would prevail in the market under the condition described above. Identify output for the dominant firm as well as the competitive fringe b. Assume that the market demand curve shifts rightward by 40,000 units. Show that dominant firm is indeed a price leader. What output (leader and follower) and market il after the change in demand?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Price leader
follower Perfect
91) The market for an industrial chemical has a single dominant firm and a competitive fringe
comprised of many firms that behave as price takers. The dominant firm has recently begun COMPL
behaving as a price leader, setting price while the competitive fringe follows. The market
demand curve and competitive fringe supply curve are given below. Marginal cost for the
dominant firm is $0.75 per gallon.
QM = 140,000 -32,000P marker Quantity demanded.
QF= 60,000+ 8,000P,
where QM = market quantity demanded, and QF = the supply of the competitive fringe.
Quantities are measured in gallons per week, and price is measured as a price per gallon.
a. Determine the price and output that would prevail in the market under the conditions
described above. Identify output for the dominant firm as well as the competitive fringe.
b. Assume that the market demand curve shifts rightward by 40,000 units. Show that the
dominant firm is indeed a price leader. What output (leader and follower) and market price
will prevail after the change in demand?
Transcribed Image Text:Price leader follower Perfect 91) The market for an industrial chemical has a single dominant firm and a competitive fringe comprised of many firms that behave as price takers. The dominant firm has recently begun COMPL behaving as a price leader, setting price while the competitive fringe follows. The market demand curve and competitive fringe supply curve are given below. Marginal cost for the dominant firm is $0.75 per gallon. QM = 140,000 -32,000P marker Quantity demanded. QF= 60,000+ 8,000P, where QM = market quantity demanded, and QF = the supply of the competitive fringe. Quantities are measured in gallons per week, and price is measured as a price per gallon. a. Determine the price and output that would prevail in the market under the conditions described above. Identify output for the dominant firm as well as the competitive fringe. b. Assume that the market demand curve shifts rightward by 40,000 units. Show that the dominant firm is indeed a price leader. What output (leader and follower) and market price will prevail after the change in demand?
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