Suppose the market for tennis shoes has one dominant firm and five fringe firms. The market demand is Q = 400 – 2P. The dominant firm has a constant marginal cost of 20. The fringe firms each have a marginal cost of MC = 20 +5q. a. Verify that the total supply curve for the five fringe firms is Q₁ = P - 20. b. Find the dominant firm's demand curve. c. Find the profit-maximizing quantity produced and price charged by the dominant firm, and the quantity produced and price charged by each of the fringe firms.

Suppose the market for tennis shoes has one dominant firm and five fringe firms. The market demand is Q = 400 – 2P. The dominant firm has a constant marginal cost of 20. The fringe firms each have a marginal cost of MC = 20 +5q. a. Verify that the total supply curve for the five fringe firms is Q₁ = P - 20. b. Find the dominant firm's demand curve. c. Find the profit-maximizing quantity produced and price charged by the dominant firm, and the quantity produced and price charged by each of the fringe firms.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(9) Suppose the market for tennis shoes has one dominant firm and five fringe firms.
The market demand is Q = 400 – 2P. The dominant firm has a constant marginal
cost of 20. The fringe firms each have a marginal cost of MC = 20 +5q.
a. Verify that the total supply curve for the five fringe firms is Qƒ = P-20.
b. Find the dominant firm's demand curve.
c. Find the profit-maximizing quantity produced and price charged by the
dominant firm, and the quantity produced and price charged by each of the fringe
firms.
d. Suppose there are ten fringe firms instead of five. How does this change your
results?
e. Suppose there continue to be five fringe firms but that each manages to reduce
its marginal cost to MC = 20 + 2q. How does this change your results?

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