Suppose the market for the pain reliever aspirin is in long-run equilibrium at a price of $3 per bottle. New scientific research links aspirin with a reduced risk of heart disease. In the short run, what will happen to the price of aspirin? Explain using a diagram. In the short run, how will firms respond to the change in price described in part 1? What will happen to profits? Explain using the same diagram. Given the situation described in part 2, what can we expect to happen to the number of aspirin producers in the long run? What effect will the change in the number of producers have?

Suppose the market for the pain reliever aspirin is in long-run equilibrium at a price of $3 per bottle. New scientific research links aspirin with a reduced risk of heart disease. In the short run, what will happen to the price of aspirin? Explain using a diagram. In the short run, how will firms respond to the change in price described in part 1? What will happen to profits? Explain using the same diagram. Given the situation described in part 2, what can we expect to happen to the number of aspirin producers in the long run? What effect will the change in the number of producers have?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.11P

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