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econlab201 - Exercise Entire El crf 1 pt Assignmnt Score...

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Unformatted text preview: \ Exercise Entire: El- crf 1 pt Assignmnt Score: 35% {12 at 15 p15) 12m! 16 complete a Sara is a tiotcom entrepreneur who sells sweatshirts. She pays $1,000 a month for her Web server anti Internet Price flua ntity demanded CWfiDfl She 1133's “13 13131 that makes the SWEHISHHS {dollars per sweatshirt} {sweatshirts per week} $20 a sweatshirt. Sara has no other costs. The table sets out 0 100 the tiemanti schetiule for Sara‘s sweatshirts. 20 80 Other firms enter the Web sweatshirt business and 4B 60 compete with Sara. 5'3 40' 80 20 In the long run, the tiemanti for Sara‘s sweatshirts , 100 [1 anti her economic profit Q) Good job! The graph shows the cost curves anti revenue moves for Sara. Price (dollars per sweatshirt] 3: Sara protiuces 40 sweatshirts, sells them at a price of$t50 each, to anti makes an economic profit. There is no restriction on entry into monopolistic competition, and B Sara‘s economic profit creates an incentive for other firms to enter the Web sweatshirt business anti compete with Sara. As other firms start to make sweatshirts similar to those matie by Sara, the tiemanti for Sara‘s sweatshirts decreases. The tiemanti cmve for Sara‘s sweatshirts anti the marginal - : : - = 3 - EA-TG revenue curve shift leflwarti. The profit—maximizing quantityr anti . . price fall. Eventually, Sara is making zero economic profit anti there is no incentive for new firms to enter the market. Sara is in a long—run I} 2|] 4|} 6|} 3|] 1m} equilibrium. Quantity [sweatshirts oer week} ...
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