Math Solutions

(See Steps) Suppose the inverse demand function for a monopolistically competitive firm’s product is given by P=100-2Q and its total cost function is given

Question: Suppose the inverse demand function for a monopolistically competitive firm’s product is given by

\[P=100-2Q\]

and its total cost function is given by

\[TC=5+2Q\]
  1. Solve for the firm’s short-run equilibrium, profit-maximizing price and quantity.
  2. What adjustments in price and quantity should an astute manager anticipate in the long run? That is, in what direction will price and quantity move in the long run? Please explain.

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