You are the manager of a monopolistically competitive firm, and your demand and cost functions are given by Q = 20 – 2P and C(Q) = 104 – 14Q + Q2.
a. Find the inverse demand function for your firm’s product.
b. Determine the profit-maximizing price and level of production.
c. Calculate your firm’s maximum profits.
d. What long-run adjustments should you expect? Explain.