Question

Problem 5. Suppose we have an industry with one firm and 50 smaller firms. The large firm behaves as if its quantity produced affects the market price. Each of the smaller firms behaves competitively (taking prices as given). Market demand is: D(p) = 1000 - 50p The monopolist has zero marginal costs. Each small firm has identical cost function c(y) = y^2/2. a) Find the equilibrium price, p*. (Hint: Start by solving the small firms' problem.) b) How much does the competitive sector produce in total? c) How much will the monopolist produce?

          Problem 5.
Suppose we have an industry with one firm and 50 smaller firms. The large firm behaves as if its quantity produced affects the market price. Each of the smaller firms behaves competitively (taking prices as given).
Market demand is: D(p) = 1000 - 50p
The monopolist has zero marginal costs. Each small firm has identical cost function c(y) = y^2/2.
a) Find the equilibrium price, p*. (Hint: Start by solving the small firms' problem.)
b) How much does the competitive sector produce in total?
c) How much will the monopolist produce?

Problem 5.
Suppose we have an industry with one firm and 50 smaller firms. The large firm behaves as if its quantity produced affects the market price. Each of the smaller firms behaves competitively (taking prices as given).
Market demand is: D(p) = 1000 - 50p
The monopolist has zero marginal costs. Each small firm has identical cost function c(y) = y^2/2.
a) Find the equilibrium price, p*. (Hint: Start by solving the small firms' problem.)
b) How much does the competitive sector produce in total?
c) How much will the monopolist produce?

Added by Kathleen C.

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