Suppose the book-printing industry is competitive and begins in a long-run equilibrium.

a. Draw a diagram showing the average total cost, marginal cost, marginal revenue, and supply curve of the typical firm in the industry.

b. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books.

What happens to Hi-Tech’s profits and the price of books in the short run when Hi-Tech’s patent prevents other firms from using the new technology?

c. What happens in the long run when the patent expires and other firms are free to use the technology?