A Large Firm That Is a Price Leader in an Industry

question 11

Multiple Choice

A large firm that is a price leader in an industry characterized also by many small competing firms estimates that the market demand for its product to be as follows: Q_m = 20,700 - 75P, where Q_m is units per month.
It expects small firms in the industry to supply output according to the following function: Q_s = 700 + 25P. What is the demand function for the large firm?

• A) Q_L = 20,000 - 100P.
• B) Q_L = 20,000 + 100P
• C) Q_L = 20,700 + 125P
• D) Q_L = 21,400 - 100P
• E) Q_L = 21,400 + 100P

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Definitions:

Commercial Banks

Financial institutions that offer a wide range of services, including accepting deposits, providing loans, and other investment products to individuals and businesses.

Open Market

A freely competitive market in which any buyer or seller can participate, characterized by the absence of monopolies or exclusive control.

Government Bonds

Debt securities issued by a government to finance its expenditures, often backed by the government's ability to tax its citizens.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances in bank accounts.