Suppose that you are on the board of directors of a firm which is the dominant f

Question

Suppose that you are on the board of directors of a firm which is the dominant firm in the industry. That is, it lets all of the other firms, which are much smaller, sell all they want at the existing market price. In other words the smaller firms act like perfect competitors. Your firm, on the other hand, sets the market price, which the other firms accept. The demand curve for your industry Suppose that you are on the board of directors of a firm which is the dominant firm in the industry. That is, it lets all of the other firms, which are much smaller, sell all they want at the existing market price. In other words the smaller firms act like perfect competitors. Your firm, on the other hand, sets the market price, which the other firms accept. The demand curve for your industry

Explanation / Answer

Q = QR + QL

=> P = 300 - QR - QL

Substituting QR = 49P and QL = MC/2.96 = P/2.96 (P=MC for profit maximzation), we get

P = 300 - 49P - P/2.96

=> 50P + P/2.96 = 300

=> P = 5.9597

QR = 49P = 292.0253

QL = P/2.96 = 2.0134

Q = QR+QL = 294.0387

Please verify if the numbers in the question are correct. The answer suggests that the firm is not a dominant firm.

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