5. Monopolistic Competition Assume that there are N monopolistically competitive producers of racing bicycles. They face fixed production expenses F = $1 million and marginal costs of = $100. The demand curve facing a firm is given by: Q=5 (;, 0.01(p pavg)) (1) Where, po,g = average price of bikes in the markets, and S = 100 million is industry sales (in units, not dollars). Assume that the equilibrium is symmetric, so that each firm charges the same price. (a) Derive the price p that firm charges for its product. How does it depend on N? You may assume that no firm by itself can affect pq,g. (4 points) (b) Derive the firm's average cost. How does it depend on N? (3 points) ) Find the equilibrium N; P; and Q. How large is the difference between price and the marginal g g cost? Hint: in long-run equilibrium, profits of each firm are zero. (4 points) (d) Suppose a new market for bikes has opened, and the total industry sales are now S = $121 million. What is the new equilibrium price and number of firms? (2 points)