GA

6. ZAZA (L) is the price leader in the cabbage market. All 5 other sellers [follower (F) firms] sell cabbage at the same price as ZAZA. ZAZA 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 cabbage is given by the following function (QT= QL+QF):

P= 10,000- 2QT.

ZAZA's marginal cost function for manufacturing and selling cabbage is

MCL= 2,500 + 2.5QL

The aggregate marginal cost function for the other manufacturers of cabbage is

MCF = 1,000+ 2QF

(a)To maximize profits, how much cabbage should ZAZA produce and what price should it change?

(b)What is the total market demand for cabbage at the price established by ZAZA in part (a)? How much of total demand do the follower firms supply?