The market for gilders is initially competitive and the market demand is: P=315- 0.6QD . The combined marginal costs of the firms in the gilder industry are: MC= 9+ 0.3Q .
a. Draw the demand, and marginal cost curves. Calculate and show how much these firms will sell and what they will charge.
b. Now Massey Corp. invents a new technology that allows her firm to produce gilders at a constant marginal cost of $9. There are large fixed costs amounting to $20,000 to adopt and maintain (each year) this new technology, but she is able to monopolize the market. Draw the situation for the gilder market showing the demand Massey Corp. faces and its MR and MC cost curves.
c. How much will Massey Corp. produce and what price will they charge?
d. How much profit does Massey Corp. make?