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2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer.

2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer.

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter9: Price Takers And The Competitive Process
Section: Chapter Questions
Problem 13CQ
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2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer. d. Using one graph of the market as a whole and one graph of a representative firm's cost curves, illustrate your answers to parts a - c. (draw diagram of a , b and c and label your diagram ). e. Local steakhouses suffer from the popularity of Korean food and start incurring economic losses. What will happen to the number of steakhouses in town in the long run? Explain your answer.
Transcribed Image Text:2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer. d. Using one graph of the market as a whole and one graph of a representative firm's cost curves, illustrate your answers to parts a - c. (draw diagram of a , b and c and label your diagram ). e. Local steakhouses suffer from the popularity of Korean food and start incurring economic losses. What will happen to the number of steakhouses in town in the long run? Explain your answer.
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