SHOW WORKING

Question 2: Monopolistic Competition (16 Marks) Consider the following graph, (graph 1) for the short run equilibrium for a monopolistically competitive firm producing air-conditioning units for commercial operations. Graph1 $ Price per unit ATC P1 MC P 2 D3 P3 D2 D1 Q2 Q1 Q3 Quantity - - - MR2 MR1The following information is given: D; = $31,000 $17. 7Q TC = $650,000 + 55,0000 + 312.502 Answer the following and referring to the relevant elements of graph 1 above and show all workings. (a) Calculate price output and profit for the short run equilibrium. (4 marks) (b) Calculate price, output and profit for the long run equilibrium (with and without product differentiation). (8 marks) (C) Is the market allocatively efcient in the short run or long run (why or why not?). (2 marks) (d) Is the market productively efficient in the short run or long run (why or why not?). (2 marks)