1.13. A firm in a monopolistically competitive environment discovers that in the long run it faces inverse demand which means its marginal revenue is marginal cost is a constant P =10−(1/2)Q

, MR=10−Q

. The firm’s

.

MC=$4

a. Sketch these three curves on a graph.

b. Based on the profit-maximizing condition MC=MR

, what quantity and price should this firm set?

c. What must be the fixed cost for this firm, given it makes zero economic profits?

d. As accurately as possible, add the ATC curve to your graph. Carefully consider the ATC at the profit maximizing price.