PART A and PART B are given with answers Please Only do PART C !!!

PART A and PART B are given with answers Please Only do PART C !!!

PART A and PART B are given with answers Please Only do PART C !!!

PART A and PART B are given with answers Please Only do PART C !!!

PART A and PART B are given with answers Please Only do PART C !!!

4. (18 points) A monopolistically competitive firm has a cost function of TC(Q) = 1000+10Q2+5Q and a demand function of P(Q) = 500-30Q. Company is currently operating at a scale where the short run lasts for 1 year. That is, the fixed equipment is purchased and exhausted every year. a) What is the optimum production level and profit of this firm per year? Q=6.1875 Profit = 531.41 b) Due to entry, the demand of this firm goes to the left and becomes flatter (more price sensitive). The demand is given by: P(Q) = 300 200. What is the firm's optimum production level and profit per year now? Q=4.91 Profit = -274.79 c) Beginning next year, the company either will leave this industry OR, run an ad campaign at a cost of 800 today. With this move, beginning next year, the demand is expected to go back to its original position with a probability of 60%. (Assume that, if it goes back to its original position, it will be there forever). What is the internal rate of return of the ad campaign