$D _ { M }$ represents market demand, $S _ { F }$ represents the fringe supply curve, $D _ { R }$ represents the dominant firm's residual demand curve, $M R _ { R }$ represents the dominant firm's marginal revenue curve, and $M C$ represents the dominant firm's marginal cost curve.

-Consider the information above. In equilibrium, how many units will the dominant firm supply?

Question

$D _ { M }$ represents market demand, $S _ { F }$ represents the fringe supply curve, $D _ { R }$ represents the dominant firm's residual demand curve, $M R _ { R }$ represents the dominant firm's marginal revenue curve, and $M C$ represents the dominant firm's marginal cost curve.

-Consider the information above. In equilibrium, how many units will the dominant firm supply?

Quizplus · Accepted Answer

In a perfectly competitive market, the dominant firm would supply at the point where its MC curve intersects the market demand curve. However, in this scenario, the dominant firm faces a downward-sloping residual demand curve ($D_R$) due to the presence of the fringe firms. The dominant firm's profit-maximizing level of output is where its marginal revenue curve ($MR_R$) intersects its marginal cost curve ($MC$), while taking into account the response of the fringe firms. This occurs at an output level of 90 units, as shown in the diagram below. Therefore, the correct answer is C.

![image.png](attachment:image.png) In equilibrium, the dominant firm will produce where its marginal cost curve intersects with its marginal revenue curve. This occurs at the quantity where the dominant firm's residual demand curve intersects with its marginal cost curve. From the graph, we can see that the quantity where $D _ { R }$ intersects with $M C$ is 90 units. Therefore, the dominant firm will supply 90 units in equilibrium.

DMD _ { M }DM​ Represents Market Demand SFS _ { F }SF​

$D _ { M }$ Represents Market Demand $S _ { F }$