Suppose there are 20 competitive firms in a market. The supply curve o
Suppose there are 20 competitive firms in a market. The supply curve of each firm is q = 2p. The market demand is Q = 200 – 2p. What is the residual demand curve facing a typical firm?
What will be an ideal response?
ANSWER
The residual demand curve is equal to the market demand curve minus the supply of all the other firms. The supply of the other 19 firms is 38p. The residual demand is 200 – 40p.
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