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At a price of $1
At a price of $1.50, the total quantity demanded of a product is 80,000 units and the competitive fringe produces 15,000 units.
What is the dominant firm's residual demand at a price of $1.50?
A. 50,000
B. 95,000
C. 80,000
D. 65,000
Expert Solution
The answer is D).
The residual demand facing the dominant firm is the total quantity demanded minus the quantity supplied by the fringe firms, i.e.,
- residual demand = 80,000 - 15,00
- residual demand = 65,000
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