Apple's iPod has been the portable MP3-player of choice among many gadget enthusiasts. Suppose that Apple has
Question:
a) If Apple is a monopolist, find its optimal price and output. What are its profits?
b) Now suppose there is a competitive fringe of 12 price-taking firms, each of which has a total cost function TC(q) = 3q2 + 20q with corresponding marginal cost curve MC = 6q + 20. Find the supply function of the fringe (Hint: A competitive firm supplies along its marginal cost curve above its shutdown point).
c) If Apple operates as the dominant firm facing competition from the fringe in this market, now what is its optimal output? How many units will fringe providers sell? What is the market price, and how much profit does Apple earn?
d) Graph your answer to part (c).
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a A monopolist sets MR MC dont forget to invert the demand curve first so 100 Q m 4 Thus Q m 96 and ...View the full answer
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