Sleek Sneakers Co. is one of many firms in the market for shoes.

a. Assume that Sleek is currently earning short run economic profits. On a correctly labeled diagram, show Sleek’s profit-maximizing output and price, as well as the area representing profit.

b. What happens to Sleek’s price, output, and profit in the long run? Explain this change in words, and show it on a new diagram.

c. Suppose that over time consumers become more focused on stylistic differences among shoe brands. How would this change in attitudes affect each firm’s price elasticity of demand? In the long run, how will this change in demand affect Sleek’s price, output, and profits?

d. At the profit-maximizing price you identified in part (c), is Sleek’s demand curve elastic or inelastic? Explain.