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Suppose a large firm is the price leader in an industry that is comprised of itself and a few other smaller firms. The large firm estimates the market demand for the industry’s (homogeneous) product to be QM = 81,000 – 200P, and it expects the smaller firms to supply output according to the following function:

QS = 1,000 + 50P.

The large firm’s marginal revenue function is MR = 320 – 0.008QL and its marginal cost function is MCL = 100 + 0.014QL.

What price should the large firm set for the industry?

How much will the large firm sell at this price?

How much will the smaller firms (collectively) sell?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91235360

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