Dominant Firm with a Competitive Fringe
Suppose that the market demand for oranges is Q = 1000 − 2P , where Q = n ∗ Qf + Qd and Q is the total quantity, Qf is the quantity supplied by a ingle competitive fringe ?rm and Qd is the quantity supply by the dominant ?rms. The dominant ?rm’s marginal cost is given by mcd = 100, QD and the competitive fringe’s supply curve is given by Qf = −120 + P . There are three competitive fringe ?rms in the market.
Short Run Fixed Entry/Exit
a. Calculate the dominant firm’s residual demand, and marginal revenue of its residual demand. Plot them on the graph.
b. Calculate the equilibrium quantity and price set by the dominant ?rm. Also calculate the equilibrium quantity supplied by each competitive fringe firm.
c. Now if we change the marginal cost for the dominant firm to be mcd = 50, redo the part (a) and (b) under this new marginal cost condition.
d. Now if we change the marginal cost for the dominant firm to be mcd = 150, redo the part (a) and (b) under this new marginal cost condition.