Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Based on the best available econometric estimates, the market elasticity of demand for your firm's product is -1
Based on the best available econometric estimates, the market elasticity of demand for your firm's product is -1.5. The marginal cost of producing the product is constant at $275, while average total cost at current production levels is $350.
a. You are a monopolist.
$
b. You compete against one other firm in a Cournot oligopoly.
$
c. You compete against 19 other firms in a Cournot oligopoly.
$
e= Elasticity of demand
MC= Marginal Cost
a)
Pricing under monopoly;
P = [e/(1+e)]*MC
P = (1.5/0.5)*(275)
= 825
b)
Pricing under oligopoly;
P = [2e/(1+2e)]*MC
P = (3/2)*275
= 412.5
c)
Pricing with 19 other firms under oligopoly;
P = [20e/(1+20e)]*MC
P =(30/29)*275
= 284.48
