a) The Galadrim compete in a monopolistically competitive industry. What are the 3 characteristics of this market structure? In addition, indicate if the structure is a price taker or price searcher.

b) Draw the Galadrim's monopolistically competitive lembas bread producing firm, Sara Lembas Inc.,that is making maximum profits. Show the profits. At what point do the Galadrim produce? What price do they charge?

c) Sara Lembas, Inc. is in long run equilibrium. Now, due to the end of the War of the Ring, travelers have an easier time on the roads and journeys only take one-half the time as before. What happens to the Sara Lembas Inc. firm? Show where Sara Lembas Inc. will now produce. Show any economic profits or economic losses.

d) What happens to Sara Lembas Inc. in the long run? Explain your answer and the market dynamics in detail by words and graph. Indicate any impacts on the firm's equilibrium price and quantity.

e) A new advertising campaign featuring Legolas, Haldir and other hot elves, all of whom eat lembas bread to maintain their great physiques, increases sales for Sara Lembas Inc. What happens to the Sara Lembas Inc. firm in the short run? Show where Sara Lembas Inc. will now produce. Show any economic profits or economic losses.

f) What happens to Sara Lembas Inc. in the long run? Explain your answer and the market dynamics in detail by words and graph. Indicate any impacts on the firm's equilibrium price and quantity.

g) Draw the Sara Lembas Inc. firm in long run equilibrium. Can Sara Lembas Inc. keep any profits? Why or why not? Explain your answer in detail. What condition(s) must be true for long-run equilibrium?

h) Is Sara Lembas Inc. achieving efficiency? If so, what kind(s) of efficiency is being achieved and why or why not? If not, show the deadweight loss to Middle Earth society. Show the quantity and price where a purely competitive firm would produce at.