Consider the following graph, (graph 1) for the short run equilibrium for a monopolistically competitive firm producing air-conditioning units for commercial operations.

D1= $31,000- $17.7Q

TC = $650,000 + $5,000Q + $12.5Q2

Answer the following and referring to the relevant elements of graph 1 above and show all workings.

1. (a)Calculate price output and profit for the short run equilibrium.(4 marks)
2. (b)Calculate price, output and profit for the long run equilibrium (with and without product
3. differentiation).(8 marks)
4. (c)Is the market allocatively efficient in the short run or long run (why or why not?).(2 marks)
5. (d)Is the market productively efficient in the short run or long run (why or why not?).(2 marks)

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