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2. Alchem is the price leader in the polyglue market. All 1,000 other manufacturers (follower firms) sell polyglue at the same price as Alchem. Alchem

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2. Alchem is the price leader in the polyglue market. All 1,000 other manufacturers (follower 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. In monopolistic competition, producers must determine the price that will maximise their profits. Assume that a producer offers two different brands of a product, for which the demand functions are: Q1= 14-0.25P, Q2 = 24 - 0.5P2 And the joint cost function is: TC = Q 1 + 5Q Q2 + Q% Each firm assumes that the other firm's output will not change. Calculate the following: a. The equilibrium output and selling price for two different brands of a product. (10) b. The total profit for each firm at the equilibrium output found in Part (a). (5) (Total: 30 Marks)

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