a. Explain why the economic profit that Apple makes on the Apple Watch is likely to be temporary.

b. Draw a graph to illustrate Apple’s cost curves and revenue curves in the market for smart watches in the long run. Mark the firm’s excess capacity.

In 2015, Apple unveiled the Apple Watch, its first new product line since the iPad and the death of its co-founder Steve Jobs. The smartwatch runs apps, acts as a health and fitness tracker, and communicates with the iPhone.