The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .What will be the fringe's profit maximizing output?
A)0.6 unit
B)0.3 unit
C)1.6 units
D)2.6 units

Question

The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe.SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

-Refer to Figure .What will be the fringe's profit maximizing output?

-Refer to Figure .What will be the fringe's profit maximizing output?
A)0.6 unit 
B)0.3 unit 
C)1.6 units 
D)2.6 units

Quizplus · Accepted Answer

The profit-maximizing output is where marginal revenue equals marginal cost. In this case, marginal revenue is equal to the price, which is $2. Marginal cost is equal to the slope of the total cost curve, which is $1. Therefore, the profit-maximizing output is where the total cost curve has a slope of $1, which is at 0.6 units.

The Figure Given Below Represents the Total Output and Price