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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 (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=15,0004QT
Alchem's marginal cost function for manufacturing and selling polyglue isMCL=5,000+6QL and the aggregate marginal cost function for the other manufacturers of polyglue isMCF=2,000+4QF
- To maximize profits, Alchem should produce how manyunits and charge a price of how muchper unit?
- What is the total market demand for polyglue at the price established by Alchem. How many units?
- How much of total demand do the follower firms supply? How manyunits?
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