Return to the scenario described in question 9, the initial free-trade equilibrium for dishwashers and the increase in global demand

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QUESTION:

Return to the scenario described in question 9, the initial free-trade equilibrium for dishwashers and the increase in global demand. In your answer use a graph like those shown in the box “The Individual Firm in Monopolistic Competition”.

a. Show graphically and explain whether the typical individual firm earns an economic profit or a loss, in the short run just after the general increase in global demand occurs?

b. Show graphically and explain the situation for the typical individual firm, when the global market has adjusted to its new long run equilibrium?


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