Suppose Hoodies' demand and cost functions for selling hoodies is similar to other firms in this market. What does theory predict will happen to the price of hoodies over the long run in this market? Briefly explain, incorporating the concept of the own- price elasticity of demand. You should assume that the cost functions above incorporate all implicit and explicit costs of production. The theory predicts the price will decrease. Adjustment process: above normal profit (4500>0) will attract more competitors to the market. The entry of competitors will mean each firm has more price sensitive customers, so Shmear's price elasticity will increase. We know that the optimal markup of price over marginal cost will decline as price elasticity increases. In long run equilibrium, zero economic profit is reached (normal profit); entry stops, and the price and price elasticity stabilize. Explain the