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

b What happens to the demand for Sara’s sweatshirts in the long run? What happens to Sara’s economic profit in the long run?

Sara is a dot.com entrepreneur who has established a website at which people can design and buy sweatshirts. Sara pays £1,000 a week for her Web server and Internet connection. The sweatshirts that her customers design are made to order by another firm, and Sara pays this firm £20 a sweatshirt. Sara has no other costs. The table sets out the demand schedule for Sara’s sweatshirts.

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Price (pounds per sweatshirt) 0 Quantity demanded (sweatshirts per week) 100 20 80 40 60 60 40 80 20 100 0