Suppose the total demand for specialty coffee per hour in Ruston is Q = 640 - 80P. There are six (n = 6) monopolistically competitive firms currently in the market selling some variety of specialty coffee, each with total cost curves given by: TC₁ = 20+q; +0.0125q²| a. Find the proportional demand faced by one coffee shop, denoted Firm i. That is, suppose the firms have equal market share and determine the demand function for a single firm. b. Calculate the optimal quantity produced by Firm i. c. Calculate Firm i's profits. Will there be entry or exit by other coffee shops over time? d. Provide a generic graph the long-run outcome for Firm i given your prediction from (c). Label curves, axes, and intersection points.

Suppose the total demand for specialty coffee per hour in Ruston is Q = 640 - 80P. There are six (n = 6) monopolistically competitive firms currently in the market selling some variety of specialty coffee, each with total cost curves given by: TC₁ = 20+q; +0.0125q²| a. Find the proportional demand faced by one coffee shop, denoted Firm i. That is, suppose the firms have equal market share and determine the demand function for a single firm. b. Calculate the optimal quantity produced by Firm i. c. Calculate Firm i's profits. Will there be entry or exit by other coffee shops over time? d. Provide a generic graph the long-run outcome for Firm i given your prediction from (c). Label curves, axes, and intersection points.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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