Let's imagine that a local retail market is monopolistically competitive. Each firm (and potential entrant) is identical and faces a marginal cost that is independent of output and is equal to $100 per unit. Each firm has a fixed cost of $300,000 per month. Each active firm perceives itself facing a price elasticity of demand equal to -2. If each firm charges an equal price, they will evenly split the overall market demand of 96,000 units per month.

(4)What is the profit-maximizing price for each firm?

(5)How many firms will operate in this market in a long run equilibrium?