Questions
1). New model will attract many consumers due to its uniqueness. The demand in the market will increase. Firms will increase their supply to match the demand in the market. Price will exceed the average total cost and the firms in the market will earn economic profit.
2). Positive profits induce new firms to enter the market causing existing firms’ demand to fall, which lowers prices towards average total cost.
3)The new model will pull in numerous buyers because of its uniqueness. The demand in the market will increment. Firms will build their supply to coordinate the demand in the market. Price will surpass the average total cost and the organizations in the market will gain an economic profit.
4) Positive profits initiate new firms to enter the market making existing firms’ demand fall, which brings down prices towards average total cost
