1. Suppose that a price setting firm has the following direct demand function: Qg = 150 50P For this problem you must show all your work, no hacks, like twice the slope, etc. a b . Solve for the inverse demand curve. What is i's slope and what is it's vertical axis intercept? . Find the equation for Total Revenue. . Find the equation for Marginal Revenue. d a = . Solve for the Quantity which maximizes Total Revenue. . Solve for the Price that results when Total Revenue is maximized. Calculate the price elasticity of demand at the quantity and . price at which Total Revenue is maximized. . Suppose now that the firm is currently charging a price of $2, and the firm raises price. What will happen to Total Revenue? Explain in words (2 well-chosen sentences should suffice) and support your answer by calculating the elasticity at a price of $2. . Now, draw this price setting firms' demand curve and marginal revenue curves (both against Q) in the top graph, and then draw the TR curve directly below it. Label the price of $2 on the graph, the original quantity at that price in both the top and bottom graphs. Also, label TR at the initial quantity. Now increase price above $2 (no specific numerical value is needed). Record the new quantity in both the top and bottom graphs, also record the new TR. 2. Suppose that the MB and MC curves for an individual smoker can be represented by the following linear equations: MB =_2000-10C and MC = 1000 + 30C, where C is the number of cigarettes smoked daily. i) Justify using three reasons why for this smoker the MB curve might be downward sloping. iy Justify using three reasons why for this smoker the MC curve might be upwards sloping. ii) Depictin a single graph the MB and MC curves, being sure to label correctly the two axes. iv) Solve for the optimal number of cigarettes for this smoker, given the current MB and MC curves. v) What impact would a new highly effective smoking cessation aid do in this graph, (shift MB or MC) and what would happen to the optimal number of cigarettes smoked? Explain in a sentence or two which curve shift and why. Depict the result in your graph. vi) What impact would news that this smoker is about to become a first time parent do in the graph draw in part iii)? Would the news have the impact of shifting MB or MC and what would happen to the optimal number of cigarettes smoked? Explain in a sentence or two which curve would shift and why. Depict the result in your graph