OG & Services competes with MG & Services, both the firms sells exactly same quality of cement. The market demand for the cement is Qd=50 - 20P where Qd is the quantity demanded and P is the price. Thus, if the firms charge a different price, the lower price firm will grab the entire market share but if they charge same price, they will split the market share. The marginal cost functions for both the firms is constant at $1.25. If the two firms compete on the basis of price, what is the market output level and what is the market price.

b) The demand of a local fast food chain is Qd = 225 - 10P where Qd is the quantity demanded and P is the price. The market structure is best described as monopolistic competition. If C(q) = 0.15Q², is the cost function of the restaurant. Determine the profit maximizing level of output and price charged. Is the Lon-run equilibrium for the restaurant? How do you know?