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

P =45-0.2Q

TC = 500 + 5Q

a. What is the profit-maximizing quantity and price that the firm should sell its product? (6 marks)

b. Calculate the profits made at the profit-maximizing output.

(5 marks)

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

(6 marks)