1.Assume the following inverted demand function of a firm in the short run: P = 20 - Q. Now assume the total cost function of this firmis : TC = 50 + 32Q - 4Q₂

The above cost function yields the MC function as32- 8Q

(a) What is the profit-maximixing price and output of this firm?

(b). Is this firm earning a profit or incurring a loss? What is the amount of short-run profit or loss? Explain fully.

2.Assume the following demand and supply equations of a popular product sold in a monopolitically competitive market:

Qd: 10 - 2p

Qs: 7+ 8p

(a). What is the equilibrium price and the equilibrium quantity?

(b). Now assume a firm decides to charge a price of 1.5. What will be the new price and new quantity?