Price Leadership. Biking Magazine is a dominant price leading firm. Wheel Deal and Free Wheel are competing magazines.
Biking: TCb = $17500 - 0.50Qb + $0.000005QB2; MCb = ΔTCb/ΔQb = -$0.50 + $0.00001Qb
Wheel Deal: TCw = $15000 + 2Qw + $0.00005Qw2; MCw = ΔTCw/ΔQw = $2 + $0.0001Qw
Free wheel: TCf =$40000 + $1875Qf + $0.0000125Qf2; MCf = ΔTCfΔQf = $1875 + 0.000025Qf
the industry demand curve is: Qd = 305,000 - 50,000P. Wheel Deal and Free Wheel are perfect substitutes for Biking magazine.
Determine the supply curves for Wheel Deal and Free Wheel magazines, assuming the firms operate as price takers. What is the demand curve faced by Biking? Calculate Biking profit maximizing price and output levels. (Biking's total revenue and marginal revenue functions are TRb = $4Qb - $0.00001Qb2 and MRb = ΔTRb/ΔQb = $4 = $0.00002Qb.)
Calculate the profit maximizing output levels for the Wheel Deal and Free Wheel magazines. Is the market for these three magazines in short-term equilibrium?