Amazon has hired your consulting firm to provide economic expertise on their book printing business. Work on your own. The book-printing business is competitive and begins in a long-run equilibrium.1 Amazon has invented a new process that sharply reduces the cost of printing books (e. g. e-books). Amazon has a patent that prevents other firms from using this technology. Required:
a. Draw a diagram describing Amazon before its invention
b. What happens to Amazon’s profits and the price of books in the short-run following Amazon’s invention? Illustrate in your diagram above.
c. What happens in the long-run when Amazon’s patent expires and any book publisher is free to use their technology?
d. Assume, again, that book printing is a competitive industry and Amazon, as well as other firms, are producing books, but currently earning economic losses.

i. How does the price of books compare to Amazon’s the average total cost, average variable cost , and the marginal cost of printing books?
ii. Draw two graphs, side by side, illustrating the present situation for Amazon and in the market?
iii. Assuming there is no change in either demand or firms’ cost curves, explain what will happen in the long-run to the price of books, marginal cost, average total cost, the quantity supplied by Amazon, and the total quantity supplied to the market?