Consider the situation of two firms in the same industry and operating in the same market. Firm A controls over 70% of the annual sales in the market.Firm B shares the remainingroughly 30% of annual sales with three other firms which also compete in this market.Firm B's share of annual sales averages about 7%.Both firms seek to maximize profit.

Firm A's monthly demand function and total cost function are as follows:

Demand Q = 20,000 - 100P Cost TC = 30,000 + 80Q + 0.02Q^2

Firm B' s total cost function is TC = 1,000 + 100Q + 0.2Q^2

a. What is the market structure in which these firms are competing?

(1) Perfect competition

(2) Monopolistic competition

(3) Oligopoly--dominant price leadership

(4) Oligolopoly--barometric price leadership

b. What will be the amount of Firm A's monthly profit?

c. What will be the amount of Firm B's monthly profit?

d. Consider the long-run average cost (LRAC) curve (below) for the technology used by the firms in this industry. The short-run average cost (SRAC) curves for Firms A & B are shown. What do the two curves demonstrate (select one with "x"? i. Firm B must rely upon S LRAC non-price competition to SRAC-B increase its sales. SRAC-A ii. Firm A has made a re- latively small capital in- vestment in technology. iii. Neither of the above