Suppose Firm X is a dominant firm in a market where the market demand is Q = 1200 -2p. Once Firm X sets its price, those small competitors set their prices a little lower so that they can always sell up to their capacity. Assume the small firms’ combined capacity is 100 units. Further assume Firm X’s marginal cost is 50. Answer the following questions.Let Q^D be the quantity produced by the dominant firm. Write down the residual demand function faced by Firm X. (Hint: Think about how Q and Q^D are related.)Find Firm X’s profit-maximizing price.

A residual demand function means the demand faced by an individual firm (Firm X in given case) that…

Answered: Suppose Firm X is a dominant firm in a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Firm X is a dominant firm in a market where the market demand is Q = 1200 -2p. Once Firm X sets its price, those small competitors set their prices a little lower so that they can always sell up to their capacity. Assume the small firms’ combined capacity is 100 units. Further assume Firm X’s marginal cost is 50. Answer the following questions.
1. Let Q^D be the quantity produced by the dominant firm. Write down the residual demand function faced by Firm X. (Hint: Think about how Q and Q^D are related.)
2. Find Firm X’s profit-maximizing price.

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