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The dominant firm model yields predictions on how changes in the elasticities of certain curves affects the elasticity of residual demand and therefore the market
The dominant firm model yields predictions on how changes in the elasticities of certain curves affects the elasticity of residual demand and therefore the market power of the dominant firm. Which of the following would NOT be a prediction of this model? (In all cases, we are referring to the curves in the relevant" region, that is, the Q before the kink). Unless stated otherwise, assume QM = a - P, fringe supply is upward slopping, and MC = constant, zero fixed costs. O a. If you believe that three of the other listed options would NOT be predictions of this model, then choose this option O b. If the fringe firm supply becomes more elastic, this would result in the residual demand becoming more elastic. This would show up on a graph as the residual demand curve becoming flatter. O clfem = -4, MS = 0.50, and EFF = +2, then if the dominant firm raised its price by 1% it can be expected that this firm would sell 10% fewer units. d. If you believe that two of the other listed options would NOT be predictions of this model, then choose this option. Oe. If the fringe supply curve becomes perfectly elastic (horizontal) at, say, Ps, this would imply that if dominant firm tried to charge a price above P* (P">P") it would sell zero units. Of. If the market demand curve becomes perfectly elastic (horizontal) at, say, $100, this implies that the dominant firm can sell some amount of the good at a price above $100 since it still retains some market power. Og. If you believe that all of the other listed options would NOT be predictions of this model, then choose this option Oh. If you believe that all of the other listed options are predictions of the model, then choose this option
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