The inverse demand function for the market is Р%3D 100 — Qт where Qr is total output, the sum of output from the fringe (QF) and from the dominant firm (QD): Qr = Qr + Qp. For example, in the global oil market, the dominant firm may be OPEC, and the fringe may consist of nations producing oil that do not belong to OPEC. Assume that the fringe is competitive and that the dominant firm behaves like a monopoly. The marginal cost function for the fringe is MC; = 20 + QF and the marginal cost function for the dominant firm is MC, 10 + QD. (1) Solve this model for the market price and for the amount of output from the fringe (QF) and from the dominant firm (QD). (2) Is this market outcome efficient?

The inverse demand function for the market is Р%3D 100 — Qт where Qr is total output, the sum of output from the fringe (QF) and from the dominant firm (QD): Qr = Qr + Qp. For example, in the global oil market, the dominant firm may be OPEC, and the fringe may consist of nations producing oil that do not belong to OPEC. Assume that the fringe is competitive and that the dominant firm behaves like a monopoly. The marginal cost function for the fringe is MC; = 20 + QF and the marginal cost function for the dominant firm is MC, 10 + QD. (1) Solve this model for the market price and for the amount of output from the fringe (QF) and from the dominant firm (QD). (2) Is this market outcome efficient?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.3P

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