Qsara is a dotcom entrepreneur who has established a web

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Q. Sara is a dot.com entrepreneur who has established a Web site at which people can design and buy a sweatshirt. Sara pays $1,000 a week for her Web server and Internet connection. Sara has no other costs for Sweatshirts which her purchaser's designs are prepared to order by another firm, and Sara pays this firm $20 a sweatshirt. The table sets out the demand schedule for Sara's sweatshirts.

Price (dollars per sweatshirt) Quantity (sweatshirts per week)

0 100

20 80

40 60

60 40

80 20

100 0

a. Calculate Sara's profit-maximizing price, output, as well as economic profit.

b. Do you expect other firms to enter the Web sweatshirt business and compete with Sara?

c. What happens to the demand for Sara's sweatshirts in long run? In long run, what happens to Sara's economic profit?

Reference no: EM13352204

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