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You and some friends are discussing news that could change the world as we know it, if the world-changing company survives! Hermes, a new automaker, unveils a new automobile that runs on plastic grocery bags and gets 100 miles to the bag. It enjoys a monopoly on this new technology. Assume that Hermes is a profit-maximizing firm and currently operates at a negative economic profit in the short run.
-Draw a correctly-labeled graph for Hermes, showing the profit-maximizing price Pm and quantity Qm of the new car. Also shade the area of the negative economic profit.
-Why would Hermes continue to operate in the short run if it is earning negative economic profit?
-What would happen to the total revenue of Hermes if it decided to make one fewer car than Qm? Why?
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