7. The long-run supply curve indifferent cost industries The following graph shows the market for breakfast bar. Initially, the market is in a long-run equilibrium. Suppose that a change in tastes resulted in a rightward shift in demand. On the following graph, shift the demand or supply curve to reflect this change in tastes. Then use the grey point (star symbol) to indicate the new short-run equilibrium. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE (Dollars per box) 10 8 2 0 0 2 4 In the short run, firms will 6 Short-run Supply Demand QUANTITY (Thousands of boxes) 8 10 Demand Short-run Supply Short-run Equilibrium Long-run Equilibrium Long-run Supply (?) In the short run, the supply curve will On the previous graph, show the shift in the supply curve and then use the purple point (diamond symbol) to indicate the resulting new long- run equilibrium. Comparing the two long-run equilibria on the graph, you can see that the breakfast bar market is an example of

7. The long-run supply curve indifferent cost industries The following graph shows the market for breakfast bar. Initially, the market is in a long-run equilibrium. Suppose that a change in tastes resulted in a rightward shift in demand. On the following graph, shift the demand or supply curve to reflect this change in tastes. Then use the grey point (star symbol) to indicate the new short-run equilibrium. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE (Dollars per box) 10 8 2 0 0 2 4 In the short run, firms will 6 Short-run Supply Demand QUANTITY (Thousands of boxes) 8 10 Demand Short-run Supply Short-run Equilibrium Long-run Equilibrium Long-run Supply (?) In the short run, the supply curve will On the previous graph, show the shift in the supply curve and then use the purple point (diamond symbol) to indicate the resulting new long- run equilibrium. Comparing the two long-run equilibria on the graph, you can see that the breakfast bar market is an example of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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ECON QUESTION
There are two reasons that some goods (toilet paper) are experiencing shortages (none available most of the time.) One reason is that stores don't want to look bad by raising prices dramatically in the face of the sudden, huge increase in demand. The other reason has to do with short run versus long run supply. Explain.
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Figure: Cost Curves for Corn Producers Price, cost of bushel $30 26 MC 22 18 ATC AVC 14 10 1 3 4 7 Quantity of corn (bushels) Reference: Ref 12-3 (Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $10, in the short run, the farmer will produce of corn and earn an ec omic equal to 2 bushels; profit; $0 2 bushels; loss; just more than $80 per bushel 3 bushels; profit; loss, -$15 4 bushels; profit; just less than $80 per bushel
10 The industry in the figure given below on the left consists of many firms with identical cost structures, and the industry experiences constant returns to scale. a. Draw the short-run market supply curve up to 4,000 units of output. Instructions: Use the tool provided (SRMSC) to draw the short-run market supply curve. Plot three points total. b. Draw the long-run market supply curve from zero to 4,000 units of output. Instructions: Use the tool provided (LRMSC) tool to draw the long-run market supply curve. Plot only the endpoints across the entire output range (0 to 4,000). Price ($) 50 40 40 Typical Firm Market Price ($) 50 MC ATC 40 30 AVC 20 20 10 0 10 20 20 30 Quantity 40 40 50 50 30 20 20 10 0 D Tools / LRMSC SRMSC 1000 2000 3000 4000 5000 Quantity
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Suppose that the perfectly competitive tuna Industry is In long-run equilibrium at a price of $3 per can of tuna and a quantity of 600 million cans per year. Suppose the Surgeon General Issues a report saying that eating tuna is bad for your health. The Surgeon General's report will cause consumers to demand Shift the supply curve, the demand curve, or both on the following diagram to illustrate these short-run effects of the Surgeon General's announcement. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply X Demand 400 600 800 QUANTITY (Millions of cans) 0 0 In the long run, some firms will respond by 5 0 200 0 200 Demand 1000 Shift the supply curve, the demand curve, or both on the following diagram to Illustrate both the short-run effects of the Surgeon General's announcement and the new long-run equilibrium after firms…
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Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 500 million cans per year. Suppose that WebMD claims that the bacteria found in tuna will decrease your expected lifespan by 2 years. WebMD's claim will cause consumers to demand Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of WebMD's claim. ? PRICE (Dollars per can) 10 9 8 0 O tuna at every price. In the short run, firms will respond by 100 200 Supply Demand 300 400 500 600 700 800 QUANTITY (Millions of cans) 000 1000 Demand 1 Supply
Suppose the cost of renting a snowy bus were to fall from $30 per hour to $20 per hour. What do you expect would happen in the short-run (stage 1 equilibrium) to (a) the number of cones produced by each snowy bus; (b) total production of cones in the market, and (c) economic profits of snowy bus businesses? Briefly explain (you don't need to do any calculations, just explain inwords).
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