Harper Industries is the dominant firm in a six firm industry with a homogeneous
ID: 1106051 • Letter: H
Question
Harper Industries is the dominant firm in a six firm industry with a homogeneous product, which has a total market demand given by Q = 62 – P. Harper has competition from a fringe of five small firms that produce where their individual marginal costs equal the market price. The fringe firms each have total costs given by TCi = 25 + 8Qi + 2.5Qi2. If Harper’s total costs are given by TCH = 200 + 2QH+ 0.25QH2, what total quantity will be produced by the fringe firms?
16.00
20.00
22.00
24.00
33.00
16.00
20.00
22.00
24.00
33.00
Explanation / Answer
The total quantity that is produced by Harper equating the P with MC is 40. Putting this in the demand equation we get the quantity of the fringe firms as 22. The correct answer is C.