Problems and Applications Q7
Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations:
Demand: Q = 100N - P
Marginal Revenue: MR = 100N - 2Q
Total Cost: TC = 50 + Q^2
Marginal Cost: MC = 2Q
As N rises, the demand for each firm's product decreases.
How many units does each firm produce?
- 400N
- 25N
- 25
- 25N
What price does each firm charge?
- 125N
- 75N
- 75N
- 100N
How much profit does each firm make?
- 50 + 625N^2
- 1,875N^2
- 2,500N^2 - 50
- 1,250N^2 - 50
In the long run, firms will exist in this market.