8. Suppose that the European Union textile industry is competitive, and there is no international trade in textiles. In long-run equilibrium, the price per unit of cloth is €30.

a. Describe the equilibrium using graphs for the entire market and for an individual producer.

Now suppose that textile producers in non-EU countries are willing to sell large quantities of cloth in the EU for only €25 per unit.

b. Assuming that EU textile producers have large fixed costs, what is the short-run effect of these imports on the quantity produced by an individual producer? What is the short-run effect on profits? Illustrate your answer with a graph.

c. What is the long-run effect on the number of EU firms in the industry?