Market Structures and Pricing Decisions Applied Problems*** Each part numbered showing all work pls read assignment carefully. Put in a word document!!!!!Please complete the following two applied problems:Problem 1: Robert’s New Way Vacuum Cleaner Company is a newly started smallbusiness that produces vacuum cleaners and belongs to amonopolistically competitive market. Its demand curve for the product isexpressed as Q = 5000 – 25P where Q is the number of vacuum cleanersper year and P is in dollars. Cost estimation processes have determinedthat the firm’s cost function is represented by TC = 1500 + 20Q +0.02Q2. Show all of your calculations and processes. Describe youranswer for each question in complete sentences, whenever it isnecessary.What are the profit-maximizing price and output levels?Explain them and calculate algebraically for equilibrium P (price) and Q(output). Then, plot the MC (marginal cost), D (demand), and MR(marginal revenue) curves graphically and illustrate the equilibriumpoint.How much economic profit do you expect that Robert’s company will make in the first year?Do you expect this economic profit level to continue in subsequent years? Why or why not?Problem 2: Greener Grass Company (GGC) competes with its main rival, BetterLawns and Gardens (BLG), in the supply and installation of in-groundlawn watering systems in the wealthy western suburbs of a majoreast-coast city. Last year, GGC’s price for the typical lawn system was$1,900 compared with BLG’s price of $2,100. GGC installed 9,960 systems,or about 60% of total sales and BLG installed the rest. (No doubt manyadditional systems were installed by do-it-yourself homeowners becausethe parts are readily available at hardware stores.) GGC has substantial excess capacity–it could easily install25,000 systems annually, as it has all the necessary equipment and caneasily hire and train installers. Accordingly, GGC is consideringexpansion into the eastern suburbs, where the homeowners are lesswealthy. In past years, both GGC and BLG have installed several hundredsystems in the eastern suburbs but generally their sales efforts are metwith the response that the systems are too expensive. GGC has hired youto recommend a pricing strategy for both the western and eastern suburbmarkets for this coming season. You have estimated two distinct demandfunctions, as follows: Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag – 1500Ab + 0.2Yw for the western market and Qe = 36620 – 25Pge + 7Pbe + 1180Ag – 950Ab + 0.085Ye for the eastern market, where Q refers to the number of unitssold; P refers to price level; A refers to advertising budgets of thefirms (in millions); Y refers to average disposable income levels of thepotential customers; the subscripts w and e refer to the western andeastern markets, respectively; and the subscripts g and b refer to GGCand BLG, respectively. GGC expects to spend $1.5 million (use Ag = 1.5)on advertising this coming year and expects BLG to spend $1.2 million(use Ab = 1.2) on advertising. The average household disposable incomeis $60,000 in the western suburbs and $30,000 in the eastern suburbs.GGC does not expect BLG to change its price from last year because ithas already distributed its glossy brochures (with the $2,100 pricestated) in both suburbs, and its TV commercial has already beenproduced. GGC’s cost structure has been estimated as TVC = 750Q +0.005Q2, where Q represents single lawn watering systems. Show all of your calculations and processes. Describe youranswer for each item below in complete sentences, whenever it isnecessary.Derive the demand curves for GGC’s product in each market.Derive GGC’s marginal revenue (MR) and marginal cost(MC) curves in each market. Show graphically GGC’s demand, MR, and MCcurves for each market.Derive algebraically the quantities that should be produced and sold, and the prices that should be charged, in each market.Calculate the price elasticities of demand in eachmarket and discuss these in relation to the prices to be charged in eachmarket.Add a short note to GGC management outlining anyreservations and qualifications you may have concerning your pricerecommendations