Asked by sujana dontukurthy on May 24, 2024
Verified
Roach Motors is the dominant used-car dealer in a small Midwestern city.After paying $50,000 for overhead, Roach Motors' cost per car is $500.There are 4 other small used-car lots in this town, but since they are not large enough to purchase cars through the same discount sources as Roach, each firm faces the cost function C 5,000 700Q 5Q2.The demand for used cars is Q 300 P1/10.Assuming Roach sets the market price so as to maximize its profit, how many cars will each of the follower firms supply?
A) 19
B) 13
C) 9
D) 16
E) 8
Cost Function
An equation or mathematical formula that describes the cost of producing a product or service as a function of input prices and output quantity.
Market Price
The current price at which a good or service can be bought or sold in a particular market.
Discount Sources
Financial operations or entities that offer reduced pricing or rates usually below the standard cost, often for promotional or clearance purposes.
- Study the outcomes of monopolistic dominance on the production capacity and price determination within markets.
- Explore the relationship between firms' cost structures and their strategic planning, as well as the implications for market results.
Verified Answer
BC
Blaine Campbell
May 31, 2024
Final Answer :
B
Explanation :
Given the demand function and Roach Motors' strategy to maximize profit, the follower firms will adjust their supply based on the market price set by Roach. The calculation involves understanding the equilibrium where Roach Motors' actions determine the market conditions, and the follower firms react accordingly. Without the specific calculations of Roach Motors' profit-maximizing price, we can't directly solve for the quantity supplied by each follower firm. However, assuming Roach Motors sets a price that maximizes its profit, the follower firms, facing their cost structure, will supply a quantity that is best for them given the price. The correct answer would depend on understanding the market dynamics and the cost structures of the firms, which typically involves solving for the equilibrium price and quantity in the market.
Learning Objectives
- Study the outcomes of monopolistic dominance on the production capacity and price determination within markets.
- Explore the relationship between firms' cost structures and their strategic planning, as well as the implications for market results.