Question: Work all parts and show your work in the space provided (or add extra space to your answers in this document as needed).

1. Explain the competitive process when a firm earns a positive economic profit.
2. Explain what is different between firms in monopolistic competition and firms in oligopoly? What does this difference mean for prices and quantities and for economic profit.
3. A firm has estimated the following demand function for its product: Q = 8 - 2P + 0.10I + A
   Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P=$10, I=100, and A=20.
   Based on this information, calculate values for: quantity demanded; price elasticity of demand; income elasticity of demand; and advertising elasticity. (Use the point formulas to complete the required elasticity calculations).
4. The market demand and marginal cost functions for a product sold by a monopolist are:

Demand: QD = 100 – 2P

Marginal Cost: MC = 1.5Q

Based on this information, calculate the profit-maximizing price and quantity and the revenue maximizing price and quantity:

Price: $2.99

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