An industry consists of a dominant firm with costs C(Qd) = Qd and 8 identical fringe firms, each with costs c(q) = 1 + q^2. Market demand is Q = 20 - p.
1. What is the supply schedule for a fringe firm in the long run? Sketch the supply. (You would need MC and AC.)
2. What is the total supply of the fringe?
3. Derive the residual demand for the dominant firm. Sketch the demand, supply of the fringe, and the residual demand.
4. Suppose, the dominant firm chooses to allow fringe to produce. What are the equilibrium price and output of each of the firms?