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9:48 Chegg Home Student question Expert Q&A My solutions Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(q)-q. The market demand is Q(P)-20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? Skip question Start Solving Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior) ||| = Exit Ĉ VPN LTE 2 4 C72 ا... €/QEOO Notifications Example: Dominant Firm Model with Capacity Option 1: Say we choose to eliminate the fringe firms . Then, QR = 20-2P -> P-10- Q/2. • But P=5.5 is not in the interior. Check the boundary points • -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36. Time Left: 00:08:53 • Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.

9:48 Chegg Home Student question Expert Q&A My solutions Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(q)-q. The market demand is Q(P)-20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? Skip question Start Solving Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior) ||| = Exit Ĉ VPN LTE 2 4 C72 ا... €/QEOO Notifications Example: Dominant Firm Model with Capacity Option 1: Say we choose to eliminate the fringe firms . Then, QR = 20-2P -> P-10- Q/2. • But P=5.5 is not in the interior. Check the boundary points • -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36. Time Left: 00:08:53 • Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter9: Monopoly
Section: Chapter Questions
Problem 31P: Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as...
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Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(g) = 4g, their total capacity is K = 2 units. The dominant firm has TC(g). The market demand is (P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior).

9:48 Chegg Home Student question Expert Q&A My solutions Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(q)-q. The market demand is Q(P)-20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? Skip question Start Solving Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior) ||| = Exit Ĉ VPN LTE 2 4 C72 ا... €/QEOO Notifications Example: Dominant Firm Model with Capacity Option 1: Say we choose to eliminate the fringe firms . Then, QR = 20-2P -> P-10- Q/2. • But P=5.5 is not in the interior. Check the boundary points • -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36. Time Left: 00:08:53 • Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.
Transcribed Image Text:9:48 Chegg Home Student question Expert Q&A My solutions Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(q)-q. The market demand is Q(P)-20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? Skip question Start Solving Example: Dominant Firm Model with Capacity The cost function of the fringe firms is TC(q) = 4q, their total capacity is K = 2 units. The dominant firm has TC(g) = q. The market demand is Q(P) = 20-2P. What is the fringe supply? What is the profit maximizing price for the dominant firm? (Please specify why P = 5.5 is not in the interior) ||| = Exit Ĉ VPN LTE 2 4 C72 ا... €/QEOO Notifications Example: Dominant Firm Model with Capacity Option 1: Say we choose to eliminate the fringe firms . Then, QR = 20-2P -> P-10- Q/2. • But P=5.5 is not in the interior. Check the boundary points • -> P=0, Q=20, Profit=0; P=4, Q=-12, Profit= 36. Time Left: 00:08:53 • Then the problem is to maximize: (10-Q/2)Q-Q. FOC gives Q=9, P=5.5.
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