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+QFQT=QL+QF): P=10,000−4QTP=10,000−4QT Alchem’s marginal cost function for manufacturing and selling polyglue is MCL=5,000+6QLMCL=5,000+6QL and the aggregate marginal cost function for the other manufacturers of polyglue is ΣMCF=2,000+4QFΣMCF=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.
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+QFQT=QL+QF): P=10,000−4QTP=10,000−4QT Alchem’s marginal cost function for manufacturing and selling polyglue is MCL=5,000+6QLMCL=5,000+6QL and the aggregate marginal cost function for the other manufacturers of polyglue is ΣMCF=2,000+4QFΣMCF=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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 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+QFQT=QL+QF):
P=10,000−4QTP=10,000−4QT
Alchem’s marginal cost function for manufacturing and selling polyglue is MCL=5,000+6QLMCL=5,000+6QL and the aggregate marginal cost function for the other manufacturers of polyglue is ΣMCF=2,000+4QFΣMCF=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.
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