Stay Dry Company is a monopolistically competitive firm which produces umbrellas and until recently, was quite economically profitable. As competitors flooded the umbrella industry in recent months, Stay Dry Company and many other firms in the industry have started to suffer short-run losses. The below graph illustrates the demand and cost curves for Stay Dry Company. Assume that Stay Dry Company believes that the losses are only temporary and has decided to stick through the difficult times, relying on its capital reserves. Illustrate what will happen as this industry begins to transition to the long-run by shifting the demand curve for Stay Dry Company's products in the appropriate direction. Provide your answer below: Price of Umbrellas 10 -5 20 ATC MC Original Demand Curve Demand D 2 4 6 8 Quantity of Umbrellas 10 Suppose there are only two companies that make a product: Company X and Company Y. Now suppose that both companies have to choose one of two potential strategies for pricing this product: setting a low price or setting a high price. The table below shows the expected profits for each company under each pricing scenario. Assume both companies are in competition with each other and seek to maximize their profits. Under these conditions, how much profit should we expect each company to earn? High Price Company Y Low Price High Price Company X Low Price Profit for Company Y: $755,000 Profit for Company Y: $117,000 Profit for Company X: $755,000 Profit for Company X: $958,000 Profit for Company Y: $958,000 Profit for Company Y: $360,000 Profit for Company X: $117,000 Profit for Company X: $360,000 Provide your answer below: Company X Profit=$ Company Y Profit=$ The below graph shows the demand and cost curves for ABC Electric Co, a natural monopoly in a small town which currently operates at its profit maximizing levels at point A. Suppose that the government has considered a number of options to regulate this monopoly and has finally decided to force the company to produce the perfectly competitive quantity Qe where marginal cost intersects the demand curve. Which of the following is a consequence of this regulation? Price 3 Select the correct answer below: Q A D MR 0 E MC AC Quantity Demand the firm will lose money and go out of business unless supported by the government The economy would become less productively efficient, since the good is produced at a higher average cost. The firm will break even and fail to extract monopoly profits The firm will produce less than it would if left unregulated, which will cause shortage of the good