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Consider a profit-maximizing firm producing a differentiated product in a competitive market. The firm's cost structure is described by the following equations C = 20

Consider a profit-maximizing firm producing a differentiated product in a competitive market. The firm's cost structure is described by the following equations C = 20 + 0.25q? and

MC = 0.50q, where q is the quantity produced and sold in a week.

Currently, the demand for the firm's product is described by the following equations: P = 36 - 0.125q and MR = 36 - 0.25q.

PART A: What is the current quantity traded (the quantity the firm produces to maximize its profit)?

PART B: What is the current pice the firm charges so as to maximize its profit?

PART C: What is the firm's current profit at the quantity traded?

PART D: Consider that as the market adjusts in the long run, the demand for the firm's product is described by one of the following equations:

  1. P = 33 - 0.125q and MR = 33 - 0.25q
  2. P = 36 - 0.125q and MR = 36 - 0.25q
  3. P = 39 - 0.125q and MR = 39 - 0.25q

What is the firm's expected profit?

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