The question is about monopolistic competition.

3. Monopolistic Competition: Assume that there are / monopolistically competitive producers of racing bicycles. They face fixed production expenses F = $100 and marginal costs of c = $10 . The demand curve facing a firm is given by: Q =S N -0.1 (P - Paug) Where, Pang = average price of bikes in the markets, and S = 4000 is industry sales (in units, not dollars). Assume that the equilibrium is symmetric, so that each firm charges the same price. (a) Derive the price p that firm charges for its product. How does it depend on N ? You may assume that no firm by itself can affect Pavg. (b) Derive the firm's average cost. How does it depend on N? (c) Find the equilibrium N, P, and Q . How large is the difference between price and the marginal cost? Hint: in long-run equilibrium, profits of each firm are zero (d) Suppose a new market for bikes has opened, and the total industry sales are now S = 9000. What is the new equilibrium price and number of firms