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The average avoidable cost for a fringe firm is AAC(q) = 20/q + 5q. The marginal cost function for a fringe firm is MC = 10q . There are 10 fringe firms. The marginal cost of the dominant firm is 2 and the demand function is Q = 100 - P. (a) What is the supply function of the fringe? What is P0? (b) What is the residual demand function for the dominant firm? (c) What is the profit-maximizing price of the dominant firm? (d) Compare monopoly profits to the profits of the dominant firm. Which market structure is socially preferable, dominant firm or monopoly? Why?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91669520

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