Netflix profits slide Netflix has hit a bump in the road on its quest to reach 60 million to 90 million subscribers in the United States and, by the end of 2016, become fully global. Netflix faces fierce competition from streaming rivals like Amazon, HBO, and Hulu and also competes against cable, satellite, YouTube, and DVDs.

Source: The New York Times, October 14, 2015 Explain why more firms have entered the streaming-video market and how the economic profit of firms in the market will likely change. What will each firm’s economic profit be in the long run? Explain your answer.

Use the following information to work Problems 6 and 7.

The United States claims that Canada subsidizes its softwood lumber production and that imports of Canadian lumber damage the interests of U.S. producers.

The United States has levied a tariff on Canadian imports to counter the subsidy.

Canada is thinking of retaliating by refusing to export water to California. Table 1 shows a payoff matrix for the game that the United States and Canada play.