1.A dry-cleaning business operates in a monopolistically competitive market with the following demand and marginal revenue curves:

P = 100-5Q

TR = 100Q-5Q²

MR = 100-10Q

The business's total and marginal cost curves are:

TC = 4Q + Q² + 5

MC = 4+2Q

where P is in dollars per unit, output rate Q is in units per time period, and total cost C is in dollars.

a.Determine the price and output rate that will allow the firm to maximize profit or minimize losses. Is this a long-run equilibrium? Why or not?

b.Suppose the short-run marginal product of labour curve for the dry cleaner is MP_L = 6.20 - 0.04L.The business is running a special promotion and will charge $30 per family.

i.Determine how many employees will be hired by the dry cleaner if the daily wage rate is $168.

ii.Determine how many employees will be hired by dry cleaner if the daily wage rate declines to $150.

iii.Suppose the dry cleaner hires labour from competitive factor markets. Graphically illustrate and discuss the effect of an increase in the wage rate in a competitive labour market.