A. One of the assumptions of the Krugman model is that the price elasticity of demand becomes less elastic as consumption increases. How would the basic Krugman graph change if the price elasticity of demand became more elastic as consumption increases?

B. Suppose a firm in a symmetric monopolistic-competitive industry (i.e., all firms in the industry have the exact same cost structure) has the cost function C = 200,000 + 500X where X is the firm's sales. Further assume that industry sales (S) is 500,000 and the slope parameter on the demand curve (b) is 0.025. Calculate the equilibrium number of firms in the industry (n), the price charged by each firm (P), and the number of sales each firm has (X).