A Large Firm That Is a Price Leader in an Industry

question 19

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. If the large firm's marginal cost is constant at $52, what quantity will it sell?

• A) 14,800
• B) 6,875
• C) 6,625
• D) 7,400
• E) 8,550

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