Assume that the short-run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of output and enter these figures in the table.

Output Total cost Marginal cost Quantity demanded Price Marginal revenue

0 $ 25 0 $60

1 40 $_____ 1 55 $_____

2 45 _____ 2 50 _____

3 55 _____ 3 45 _____

4 70 _____ 4 40 _____

5 90 _____ 5 35 _____

6 115 _____ 6 30 _____

7 145 _____ 7 25 _____

8 180 _____ 8 20 _____

9 220 _____ 9 15 _____

10 265 _____ 10 10 _____

(a) Compute the marginal cost and marginal revenue of each unit of output. (16.7 points)

(b) At what output level and at what price will the firm produce in the short run? What will be the total profit? (16.7 points)

(c) What will happen to demand, price, and profit in the long run? (16.7 points)

This assignment is due at the end of Week 7 (3 March 2013).

Output Total cost Marginal cost Quantity demanded Price Marginal revenue

0 $ 25 0 $60

1 40 $_____ 1 55 $_____

2 45 _____ 2 50 _____

3 55 _____ 3 45 _____

4 70 _____ 4 40 _____

5 90 _____ 5 35 _____

6 115 _____ 6 30 _____

7 145 _____ 7 25 _____

8 180 _____ 8 20 _____

9 220 _____ 9 15 _____

10 265 _____ 10 10 _____

(a) Compute the marginal cost and marginal revenue of each unit of output. (16.7 points)

(b) At what output level and at what price will the firm produce in the short run? What will be the total profit? (16.7 points)

(c) What will happen to demand, price, and profit in the long run? (16.7 points)

This assignment is due at the end of Week 7 (3 March 2013).

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