. Problems and Applications Q7 Consider a monopolistically competitive market with N firms. Each firm's business opportunities are described by the following equations: Demand: Q=100N−P Marginal Revenue: MR=100N−2Q Total Cost: TC=50+Q2 Marginal Cost: MC=2Q As N rises, the demand for each firm's product . How many units does each firm produce? 400N 25N 25 25N What price does each firm charge? 125N 75N 75N 100N How much profit does each firm make? 50+625N2 1,875N2 2,500N2−50 1,250N2−50 In the long run, firms will exist in this market.

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?