1. The color copy machine market is dominated by a large firm with significant p

Question

1. The color copy machine market is dominated by a large firm with significant production capacity. The market demand for color copy machines is:
Q = 4000 - 5 P
The dominant firm has projected the supply by the small firms in the market to be:
 Qs = - 600 + 3 P
I. Write the demand curve faced by the dominant firm.
II. What price should the leader charge to drive all the small firms out of the market?
III. Write the marginal revenue function of the dominant firm.
IV. Assuming the leader's cost function is:
 TC = 6000 + 175 Q + 1/32 Q2,
determine the following:Â

e. The leader's profit

Explanation / Answer

I. Qd = 4000-5P

II. 4000-5P = -600 +3P

so P= 575

III. Marginal Revenue function = 4600 - 8P

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