# workbook!

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## workbook!

 27.9 (0) Consider a market with one large fi rm and many small fi rms. The supply curve of the small firms taken together is S(p) = 100 +p: The demand curve for the product is D(p) = 200 −p: The cost function for the one large firm is c(y) = 25y (a) Suppose that the large firm is forced to operate at a zero level of output. What will be the equilibrium price? 50. What will be the equilibrium quantity? 150. (b) Suppose now that the large fi rm attempts to exploit its market power and set a pro fit-maximizing price. In order to model this we assume that customers always go fi rst to the competitive fi rms and buy as much as they are able to and then go to the large fi rm. In this situation, the equilibrium price will be \$37.50. The quantity supplied by the large rm will be 25. and the equilibrium quantity supplied by the competitive rms will be 137.5. (c) What will be the large fi rm's profi ts? \$312.50. (d) Finally suppose that the large rm could force the competitive fi rms out of the business and behave as a real monopolist. What will be the equilibrium price? 225/2. What will be the equilibrium quantity? 175=2. What will be the large fi rm's profi ts? (175/2) squared Please explain part b,c and d. Answers are written next to the questions! Thank you!
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## Re: workbook!

 This post was updated on . b-let q = quantity produced by large firm suuply =demand 100+p+q=200-p p=100-q/2 large firm profit= (100-q/2)*q-25q just optimize get q = 25,just plug in p=100-q/2 for d part- large firm profit= (200-q)*q-25q just diff. w r. to q =0 q=175/2 ...........rest follows from this
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## Re: workbook!

 Wow, that was easy! I was trying to fit in the price leadership model! x_x Thank you so much! :)