M8 The demand and total cost functions for amonopolistically competitive market are:Q(P) = 300/N – P, where N = number of firms%3DTC(Q) = 50 + Q²There are currently three firms in this market andthey are in a short run equilibrium.a) What are the profit maximising QM and PM foreach firm?b) What is each firm's profit tM?c) In the long run, how many firms are in themarket (round to the nearest integer)?

Monopolistic competition describes an industry in which several enterprises compete for the same…

Answered: The demand and total cost functions for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The demand and total cost functions for a
monopolistically competitive market are:
Q(P) = 300/N – P, where N = number of firms
%3D
TC(Q) = 50 + Q²
There are currently three firms in this market and
they are in a short run equilibrium.
a) What are the profit maximising QM and PM for
each firm?
b) What is each firm's profit tM?
c) In the long run, how many firms are in the
market (round to the nearest integer)?

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I think that there is something wrong with step 4. In the long run, monopolistically competitive firm's function should be P = ATC, not P = MC. Long run monopolistic firm cannot turn into perfectly competitive firm in that way.

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