Suppose a monopolistically competitive firm’s demand is given by
P = 100 – 2Q
And its cost function is given by
TC = 5 + 2Q
a. Find the profit maximizing quantity, price, and total profit level.
b. Is this a long-run or a short-run outcome? How do you know?
c. Assuming that the slope of the demand curve remains constant, what will be the long-run equilibrium price and quantity for the firm?