00:01
Hey everyone, today we're solving problem number two from chapter 10 of the textbook, which says continuing with a scenario outlined in question one.
00:10
In the long run, the positive economic profits earned by a monopolist competitor will attract a response from either existing firms in the industry or firms outside.
00:20
As those firms captured the original firm's profit, which is what i've outlined here, what will happen to the original firm's profit maximizing price and output levels.
00:31
So this is basically the information given to us these first two steps, and i've basically drawn a flow chart to show what happens when other firms take the profit away.
00:41
So what is going to manifest itself in this particular situation is that there's going to be a decrease in demand for the original firm's product.
00:51
So demand for that initial product, original firm's product, is going to decrease because other firms are taking the profit away.
01:07
So when the demand goes down, this is going to cause a decrease in the firm's profit maximizing price and a decrease in the firm's profit maximizing level of output, which is basically unwinding the process described in the answer to question one...