A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.

Price

Quantity

Marginal product

$30

1

$26

2

$22

3

$18

4

$14

5

1)Calculate the marginal product for each level of output. Show you calculations at least for one line (no points will be given to this question if the answer is not supported with the information on the input data) answer in the following way:

Q=1; MP=_________

Q=2; MP=_________... etc. - [2 points]

2)If this firm has a constant marginal cost of $6, what is the profit-maximizing level of output? Why? explain [1 point for the correct answer, 1 point is for the explanation why this level of output is the profit-maximizing.] - [total 2 points]

3)When this firm profit maximizes and faces a constant marginal cost of $6, what is the amount of its markup over marginal cost? Show your calculations. [1 point]

4)What is the total profit of the firm at the output level you mentioned in question 2) above? Show your calculations [1 point]

5)For how long, on your opinion, this firm will be earning positive profits? What will happen in the long run? Why? Explain [2 points]

6)If this firm profit maximizes and faces a constant marginal cost of $6, does it have excess capacity? How do you know? [2 point]