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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?

(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.:- M91709234

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