Question

Alchem (L) is the price leader in the polyglue market. All 10 other manufacturers (follower [F] firms) sell polyglue at the same price as Alchem. Alchem allows the other firms to sell as much as they wish at the established price and supplies the remainder of the demand itself. Total demand for polyglue is given by the following function (QT=QL+QF):

P=15,000−4QT

Alchem’s marginal cost function for manufacturing and selling polyglue is MCL=5,000+6QL and the aggregate marginal cost function for the other manufacturers of polyglue is ΣMCF=2,000+4QF.

To maximize profits, Alchem should produce ____ units and charge a price of ____ per unit.

What is the total market demand for polyglue at the price established by Alchem? ____ units.

How much of total demand do the follower firms supply? ____ units.

Answer 1