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Big Steel Co. is a price leader in the local steel market. The other, smaller manufacturers set their price based on that established by Big Steel. The following information has been gathered by Big Steel's pricing department.
Price of Steel, P = 100,000 - 10 Qt
where Qt is the total amount of steel sold by all firms in the industry.
Big Steel's marginal cost curve is equal to MCb = 10,000 + Qb
and the sum of the marginal cost curves for the other companies supplying the local market is
MCs = 5000 + 2Qs

a. What is the effective demand curve facing Big Steel?

b. Illustrate what is price should Big Steel set to maximize its profits?

c. Explain how much steel will Big Steel sell? How much will its competitors sell?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M9219844

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