PROBLEM (5) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3(Q)^2. Calculating the market price under each of the 2 scenarios below, rank/order the Consumer Surplus in each scenario (don’t calculate each CS; just rank them); (i) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. (ii) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the “market supply” for the competitive market.

PROBLEM (5) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3(Q)^2. Calculating the market price under each of the 2 scenarios below, rank/order the Consumer Surplus in each scenario (don’t calculate each CS; just rank them); (i) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. (ii) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the “market supply” for the competitive market.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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PROBLEM (5) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3(Q)^2. Calculate the market price under each of the 2 scenarios below, (i) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. ( ii) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the “market supply” for the competitive market. Please answer all the parts!
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