Question

Question 2 The following table provides information about Fit's personal trainer service, a firm that is in monopolistic competition with similar firms that offer slightly differentiated services. Demand schedule Price Quantity ($/session) (session/hour) 45 Production costs Total cost ($) 21 40 33 38 30 25 4 72 a) Calculate the marginal revenue and marginal cost. (4 marks) b) What is Fit's profit-maximizing quantity? What is Fit's price? (2 marks) c) Is Fit in a long-run equilibrium? Do you expect other firms to enter the market and compete with Fit? Briefly explain. (3 marks) d) What happens to the demand of Fit's service and Fit's economic profit in the long run? Explain and illustrate with a diagram. (6 marks)

I need help for these question, please help

Answer 1

P	Q	TC	TR	MR	MC
45	0	21	0
40	1	33	40	40	12
35	2	38	70	30	5
30	3	45	90	20	7
25	4	72	100	10	27

A) MR = change in TR/change in Q

MC = change in TC/change in Q

B) Setting MR=MC, the profit maximizing output = 3 and price = 30

C) Profits = 90-45 = 45

Since the firm is earning positive profit,so the firm is in short run as in the long run, it would break even therefore positive profits would attract more firms to the market and more firms will enter the market

D) In the long run, the firm's demand will decrease as more firms enter the market

Profit = 0 in the long run as P=ATC