3.17 The Internet is affecting holiday shipping. In years past, the busiest shipping period was Thanksgiving week. Now as people have become comfortable with e-commerce, they purchase later in the year and are more likely to have gifts shipped (rather than purchasing locally). FedEx, along with Amazon and other e-commerce firms, hires extra workers during this period, and many regular workers log substantial overtime hours.

a. Are a firm’s marginal and average costs likely to rise or fall with this extra business? (Discuss economies of scale and the slopes of marginal and average cost curves.)

b. Use side-by-side firm-market diagrams to show the effects on the number of firms, equilibrium price and output, and profits of such a seasonal shift in demand for e-retailers in both the short run and the long run. Explain your reasoning.