Chamberlin monopolistic firm. Consider a firm in a monopolistic market that has the following total cost function: TC ¼ 0:03y3  0:1y2 þ 50y þ 100 while the short-run demand of the firm is: p ¼ 100  1 2 y

a. Set up the profit function and using the Solver find the optimal quantity y* to produce and the short-run equilibrium price p* for a maximum profit.

b. Visualize the profit area in a chart together with the relevant revenue, cost curves, and demand function. Extra profit will be now generated, causing new players enter the market and causing a new demand curve for each monopolistic firm.

c. Using the VBA macro provided, find the new optimal quantity and equilibrium price for the long-run period, as well as the new firm long-run demand that generates zero extra profit, tangent to the ATC curve. Assume the ATC curve is the same both for short-run and the long-run. Assume the slope changes to b ¼ 1 in the long-run demand.