1.2 In Figure 17.3, suppose that the initial profit is $1 per unit of inducement (m = 1). Suppose then, that increased competition lowers m from 1 to 0.5.

a Draw the new profit line π = mQo + mI.

b Demonstrate the case where the change in profit increases the level of inducement.

c Demonstrate the case where the change in profit decreases the level of inducement.