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(Dominant firm) Suppose that the supply of the competitive fringe is perfectly elastic at p = p . Suppose that there is a dominant firm
(Dominant firm) Suppose that the supply of the competitive fringe is perfectly elastic at p = p . Suppose that there is a dominant firm with marginal cost per unit of c with a capacity constraint of m, where p > c. Let the market demand curve be P = 100 - Q. a. Suppose that the capacity constraint of the dominant firm is not binding (the firm's capacity is larger than what it wants to produce). For what values of c will the dominant firm be an unconstrained monopolist? b. Suppose that the dominant firm's unit costs are greater than the maximum value found in a., but still less than p, and capacity is not constrained. What is the profit- maximizing price of the dominant firm? c. Suppose that p = 60 and c = 0. If the dominant firm is not capacity constrained, what is its optimal price? d. Suppose that m = 30, p = 60, c = 0. Will the dominant firm be a price maker? Will it earn monopoly profits? How much is a unit of its capacity worth
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