3. Assume that the short-run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of output and enter these figures in the table.
(a) The firm will produce in the short run at such output level, for which MR = MC, so Q = 4 units will be produced (MR = MC between 4 and 5 units produced), and the price will be P = $120. Total profit will be TP = TR - TC = 480 - 210 = $270. (b) In the long-run new firms will enter the market, because the industry is profitable, so the quantity demanded will increase, the price will decrease, and the firm will earn normal (zero) profit.