Question

Suppose the market for tennis shoes has one domi- nant firm and five fringe firms. The market demand is Q = 400 − 2 P. The dominant firm has a constant mar- ginal cost of 20. The fringe firms each have a marginal cost of MC = 20 + 5q.

a. Verify that the total supply curve for the five fringe firms is Qf = P − 20.
b. Find the dominant firm’s demand curve.

Answer 1

The total supply curve for the fringe firms is Qf = P - 20. The dominant firm's demand curve is Qd = (400 - 2P) - Qf.

Step-by-step explanation:

The total supply curve for the fringe firms is calculated by summing the individual quantities supplied by each firm at a given price. In this case, the total supply curve for the fringe firms can be represented as Qf = P - 20.

The dominant firm's demand curve can be found by subtracting the total quantity supplied by the fringe firms from the market demand. So the dominant firm's demand curve can be represented as Qd = (400 - 2P) - Qf.