It is a typical Christmas electronics shopping season, and makers of flat-panel TVs are marketing the latest available models through their own Web sites as well as via retailers such as Best Buy and Wal-Mart. Each manufacturer offers its own unique versions of flat-panel TVs in differing arrays of shapes and sizes. As usual, each is hoping to maintain a stream of economic profits earned since it first introduced these most recent models late last year or perhaps just a few months before Christmas. Nevertheless, as sales figures arrive at the headquarters of companies such as Dell, Samsung, Sharp, and Sony, it is clear that most of the companies will end up earning only a normal rate of return this year.
a. How can makers of flat-panel TVs earn economic profits during the first few months after the introduction of new models?
b. What economic forces result in the dissipation of economic profits earned by manufacturers of flat-panel TVs?