A firm has the following short-run inverse demand and cost schedules lor a particular product:
P = 45 - 0.2Q
TC = 500 + 5Q
a. At what price should this firm sell its product?
b. If this is a monopolistically competitive firm. What do you think would happen as the firm moves toward die long run? Explain.
c. Suppose in the long run, that inverse demand shifts to P = 25 - 0.2Q. What should the firm do? Explain. Provide graphs for both the short-run and long-run scenarios. Make sure your graphs include demand. MR. MC, and AC.
d. Suppose, in the long run, that inverse demand shifts to P = 45 - 0.8Q. What should the firm do Explain, and provide graphs for both the short-run and long-run scenarios. Make sure your graphs include demand, MR, MC. and AC.,
e. Does the demand in part c or part d represent a change in market share for the representative firm as a result of the entry or exit suggested in part b?