1. A firm has the following short-run inverse demand and cost schedules for a particular product:

P = 45 - 0.2Q

TC = 500 + 5Q

a. At what price should this firm sell its product?

b. If this is a monopolistically competitive firm, what do you think would happen as the firm moves toward the long run? Explain

c. Suppose in the long run, that the inverse demand shifts to P = 25 - 0.2Q.What should the firm do? Explain.Provide graphs for both the short-run and long-run scenarios. Make sure your graphs include demand, MR, MC and AC.

d. Suppose in the long run, that the inverse demand shifts to P = 45 - 0.8Q.What should the firm do? Explain.Provide graphs for both the short-run and long-run scenarios. Make sure your graphs include demand, MR, MC and AC.

e. Does the demand in part c or part d represent a change in market share for the representative firm as a result of the entry or exit suggested in part b?

2. a. An industry consists of eight firms with annual sales (in millions) of $200, $300, $900, $600, $300, $700, $500, and $600. What is the industry's C₄?

b. An industry consists of four firms with annual sales of $300, $500, $400, and $600, respectively. What is the industry's HHI?