A large firm that is a price leader in an industry characterized also by many small competing firms estimates that the market demand for its product to be as follows:
Q_m = 40,700 - 100P
where Q_m is units per month.
It expects small firms in the industry to supply output according to the following function:
Q_s = 700 + 25P
The large firm's marginal cost function is
MC_L = 100 + .016Q
a. What quantity will the large firm sell?
b. What price will the large firm set?
c. What quantity will the small firms sell?

Question

Quizplus · Accepted Answer

The Answer of A large firm that is a price leader in an industry characterized also by many small competing firms estimates that the market demand for its product to be as follows: Q_m = 40,700 - 100P where Q_m is units per month. It expects small firms in the industry to supply output according to the following function: Q_s = 700 + 25P The large firm's marginal cost function is MC_L = 100 + .016Q a. What quantity will the large firm sell? b. What price will the large firm set? c. What quantity will the small firms sell?

A Large Firm That Is a Price Leader in an Industry