PROBLEM I. Suppose that, in a market of a certain product, there is a single dominant firm with a cost function C(Q) = cQ, where c > 0 is a constant, and the competitive fringe with a supply function Qf (p) = p 150. The market demand function is given by QM (p) = 420 2p.

Q1. When c = 130, the dominant firm's profit-maximizing quantity is

(a) 72. (b) 90. (c) 84.

(d) 110. (e) 105.

Q2. When c = 130, the equilibrium market price of the product is

(a) 120. (b) 135. (c) 150. (d) 130. (e) 160.

Q3. When c = 130, what is the market share of the dominant firm? (Choose the closest.)

(a) 82% (b) 98% (c) 86% (d) 90% (e) 75%

Q4. Under what condition of c does the competitive fringe produce nothing at the equilibrium?

(a) c 110. (b) c 110. (c) c 130. (d) c 125.

(e) c 90.