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You own a small retail business that produces a product that is slightly different from that of your many competitors. Your firm is currently making an economic profit. The absolute value of the elasticity of demand for your product at the current price is less than one (i.e., inelastic).
a) What pricing strategy would you suggest, and why?
b) What would you expect the long-run future of your business to be, and why? Use graphs to explain your answer.
c) What long-run strategy would you suggest for your firm, and why? Use a graph to explain your answer.
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