2

Consider the following story: "When I had a brick-and-mortar record store, I found there is only so much left to invest after you allocated resources to labor, rent, and utilities. But to keep customers happy you had to invest in different formats - records, cassettes, compact discs. These turned to losses, as each new format made others obsolete. I was barely making it. I didn't have online competition back then, but I should thank the chain store that opened across the street. He blew me out of the water. I closed three months later, and they did me a huge favor." a. According to our perfectly competitive model, what do you think it means to be "barely making it" in this case? Explain. b. Using your answer in (a), what eventually happened to this firm so that the owner was happy to be put out of business? Explain in a couple sentences.