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You are the manager of a monopolistically competitive firm

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You are the manager of a monopolistically competitive firm. The inverse demand for your product is given by P=200-10Q and your marginal cost is MC=5+Q. A. What is the profit-maximizing level of output? B. What is the profit-maximizing price? C. What are the maximum profits? D. What do you expect to happen to the demand for your product in the long run? Explain.

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Solution Summary

The expert determines what to expect to happen for the demand for the product in the long run. The maximum profits are determined.

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Alright, so in monopolistic competition- we need to differentiate between the long run and the short run. This is what our short run equilibrium is going to look like. Profit is shaded in grey. Let's look at our functions:

Demand: ...

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