Consider the following statement in the context of the short-run model. Suppose that short-run output is positive (say, at 2%) but constant over a 2-year period. However, because of the rapid expansion of Amazon, traditional retail stores have been forced to cut prices and reduce their profit margins. Which of the statements below best describes what will happen in the IS-MP-PC diagram?

• The PC curve will shift down.

• The PC curve will shift up.

• The MP curve will shift down.

• The MP curve will shift up.

Draw the diagram corresponding to the question. Label the initial equilibrium (point A) and the final equilibrium (point B). Make sure you also label the axes. Include also a short written description.