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Unformatted text preview: as long as price is larger than 15. Market demand is . a. Write down two equations that describe the residual demand curve faced by the dominant firm. b. Draw a graph of the residual demand curve faced by the dominant firm. Be sure to label the axis and the intercepts. Include on this graph the marginal revenue curve faced by the dominant firm. c. Suppose that the dominant firm has constant marginal costs. Show on the graph how low marginal cost would need to be in order for the dominant firm to be the only firm producing. 7) The inverse market demand curve for a certain commodity is p = 85 10 Q , and costs to a single firm of producing it are C ( q ) = 120 _+ 25 q . Show that it is socially desirable that a certain quantity of the commodity is produced, but that no firm is willing to provide it. How might the government insure that the socially optimal level of output is provided?...
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This note was uploaded on 12/15/2011 for the course EES 108 taught by Professor Giligan during the Spring '11 term at Vanderbilt.
- Spring '11