1. (a)Compare and contrast the long-run equilibrium conditions for a perfectly competitive firm and a

monopolistically competitive firm.

(b)Assume that amanager of a fast-food restaurant in Georgia, USA, and thecost and demand

functions, respectively, are C(Q) = 5 + Q + 2.3Q² and Q = 65 - 5P, where Q is quantity produced or demanded (output) and P is unit price. Derive thefirm's short-run supply function or curve.

1. Suppose fast-food industry demand function is approximated as Q = Px^-8.8Py^1.85A^1.3M^1.5, where Q is fast-food quantity demanded, Px is unit price of fast-food, Py is unit price of dine-in restaurant food, A is fast-food advertisement cost, and M is fast-food consumers' average income. Also, last year, thefirm spent $2.85 million on advertising (TV, newspapers, etc.) and thetotal sales was $18.75 million. Other things equal, should you maintain, increase, or decrease theadvertising expenditures? Clearly show the steps and calculations to justify theposition. Explain.

1. Carefully explain why advertising is important or not important to thefirm.