a. Explain why the economic profit that Callaway and Nike make on golf clubs for women is likely to be temporary.
b. Draw a graph to illustrate the cost curves and revenue curves of Callaway or Nike in the market for golf clubs for women in the long run. Mark the firm’s excess capacity.
One of the hottest areas of innovation is in clubs for women, who now make up nearly a quarter of the 24 million golfers in the United States. Callaway and Nike, two of the leading golf-equipment manufacturers, recently released new clubs designed for women.