(Monopolistic Competition)
A monopolistically competitive firm has the following short-run inverse demand and cost schedules for a particular product:
P = 45 – 0.2Q
TC = 500 + 5Q
a. Following the MR = MC rule, at what price should this firm sell its product? At this price is the firm having positive or negative economic profits? What does the profit ( or loss) equal?
b. What would happen to the firm’s demand and profit (or loss) as the firm moves toward the long run?
c. Suppose in the long run, the firm’s inverse demand shifts to P = 25 – 0.2Q. What price should the firm charge? What does the profit (or loss) equal?
d. Provide graphs for both the short run and long run scenarios. Make sure your graphs include demand curve, MR, MC, and AC curves.
Please accurate to explain please