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Assume a market with a monopolistically competitive structure (differentiated products, free entry and exit). Also assume that each firm has a total cost function of TC(qi) = 150+ ½ qi 2 for i?{1,2, …, n} (i.e. symmetric cost function) . Demand curve for each firm is given by P=1000 -10n – qi which means that the demand depends not only on the price but also on the number of different substitute product that are out there.

a) What is the price, quantity and profit for each firm if there are 10 firms in the market in the short term?

b) What is the price, quantity and profit in this market in the long-term? What will happen to the number of firms in this market?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91866237

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