Intel is a monopolist manufacturing computer chips with a competitive fringe of firms that act as price takers of the price Intel sets. The market willingness to pay for the P80 chip is given by p = 400 - Q, with p in dollars per chip and Q in thousands of chips per month. The fringe marginal cost curve is MCF = 40 + 0.5QF (with QF and MCF also in thousands of chips and dollars per chip, respectively), and Intel's marginal cost of producing chips is constant at $50 per chip. Intel is planning its strategy to set the P80 chip price.
1. Calculate the residual demand Intel faces after accounting for the quantity supplied by competitive fringe for any level of price.
2. Determine how many P80 chips will Intel supply per month?
3. Determine the resulting world P80 chip price?
4. Calculate how many P80 chips are supplied by the competitive fringe?