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In the long run, some firms will respond by until Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the CDC's announcement and the new long-run equilibrium after firms and consumers finish adjusting to the news. 10 Supply Demand 8 7 Supply 4 3 Demand 2 1 downward sloping horizontal 50 100 150 200 250 300 350 400 450 500 QUANTITY (Millions of cans) vertical upward sloping The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is in the long run. PRICE (Dollars per can)

In the long run, some firms will respond by until Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the CDC's announcement and the new long-run equilibrium after firms and consumers finish adjusting to the news. 10 Supply Demand 8 7 Supply 4 3 Demand 2 1 downward sloping horizontal 50 100 150 200 250 300 350 400 450 500 QUANTITY (Millions of cans) vertical upward sloping The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is in the long run. PRICE (Dollars per can)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Long-Run Market Adjustments #### Conceptual Understanding In the long run, some firms will respond by **entering or exiting the market** until **economic profits are zero**. Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the CDC's announcement and the new long-run equilibrium after firms and consumers finish adjusting to the news. #### Graph Explanation The provided graph is an essential tool for understanding the market dynamics and adjusting to new equilibriums. Here is a detailed description: - **Axes**: - The horizontal axis is labeled as "QUANTITY (Millions of cans)", ranging from 0 to 500. - The vertical axis is labeled as "PRICE (Dollars per can)", ranging from 0 to 10. - **Supply and Demand Curves**: - The **demand curve** is downward sloping (marked in blue), indicating that as the price decreases, the quantity demanded increases. - The **supply curve** is upward sloping (marked in orange), indicating that as the price increases, the quantity supplied increases. - **Equilibrium Point**: - The initial equilibrium point is marked where the demand and supply curves intersect. - **Shifts**: - Any shifts in the demand or supply curves need to be illustrated on this graph to visualize the new short-run and long-run equilibria. #### Strategic Planning The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is **upward sloping** in the long run.
Transcribed Image Text:### Long-Run Market Adjustments #### Conceptual Understanding In the long run, some firms will respond by **entering or exiting the market** until **economic profits are zero**. Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the CDC's announcement and the new long-run equilibrium after firms and consumers finish adjusting to the news. #### Graph Explanation The provided graph is an essential tool for understanding the market dynamics and adjusting to new equilibriums. Here is a detailed description: - **Axes**: - The horizontal axis is labeled as "QUANTITY (Millions of cans)", ranging from 0 to 500. - The vertical axis is labeled as "PRICE (Dollars per can)", ranging from 0 to 10. - **Supply and Demand Curves**: - The **demand curve** is downward sloping (marked in blue), indicating that as the price decreases, the quantity demanded increases. - The **supply curve** is upward sloping (marked in orange), indicating that as the price increases, the quantity supplied increases. - **Equilibrium Point**: - The initial equilibrium point is marked where the demand and supply curves intersect. - **Shifts**: - Any shifts in the demand or supply curves need to be illustrated on this graph to visualize the new short-run and long-run equilibria. #### Strategic Planning The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is **upward sloping** in the long run.
### 8. Short-run and long-run effects of a shift in demand Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 250 million cans per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in tuna is causing bacterial infections to spread around the world. The CDC's announcement will cause consumers to demand _(less/more)_ tuna at every price. In the short run, firms will respond by _\_\_\_\_\_\_ (increasing/decreasing)_ prices. Shift the demand curve, the supply curve, or both on the following graph to illustrate these **short-run effects** of the CDC's announcement. #### Explanation: Below is a graph depicting the typical supply and demand curves for tuna in a competitive market. **Graph Description:** - **Axes:** - **X-axis:** Quantity (Millions of cans) - **Y-axis:** Price (Dollars per can) - **Supply Curve (Orange Line):** - Represented as an upward-sloping line indicating that as the price of tuna increases, the quantity supplied increases. - **Demand Curve (Blue Line):** - Represented as a downward-sloping line indicating that as the price of tuna decreases, the quantity demanded increases. - **Equilibrium Point (Black dashed lines):** - The point where the supply and demand curves intersect. - Initial equilibrium occurs at a price of $5 per can and a quantity of 250 million cans per year. #### Short-Run Effects: 1. **Demand Shift:** - Due to the CDC announcement, consumers will demand less tuna at every price. - This will cause a leftward shift in the demand curve. 2. **New Short-Run Equilibrium:** - The intersection of the new demand curve with the supply curve will determine the new equilibrium price and quantity in the short run. - Firms will decrease prices in response to the reduced demand. 3. **Visuals:** - The graph will have a new intersection point showing a decreased equilibrium quantity and a decreased equilibrium price. This scenario illustrates the basic economic principles of market equilibrium and the impact of external factors on demand.
Transcribed Image Text:### 8. Short-run and long-run effects of a shift in demand Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 250 million cans per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in tuna is causing bacterial infections to spread around the world. The CDC's announcement will cause consumers to demand _(less/more)_ tuna at every price. In the short run, firms will respond by _\_\_\_\_\_\_ (increasing/decreasing)_ prices. Shift the demand curve, the supply curve, or both on the following graph to illustrate these **short-run effects** of the CDC's announcement. #### Explanation: Below is a graph depicting the typical supply and demand curves for tuna in a competitive market. **Graph Description:** - **Axes:** - **X-axis:** Quantity (Millions of cans) - **Y-axis:** Price (Dollars per can) - **Supply Curve (Orange Line):** - Represented as an upward-sloping line indicating that as the price of tuna increases, the quantity supplied increases. - **Demand Curve (Blue Line):** - Represented as a downward-sloping line indicating that as the price of tuna decreases, the quantity demanded increases. - **Equilibrium Point (Black dashed lines):** - The point where the supply and demand curves intersect. - Initial equilibrium occurs at a price of $5 per can and a quantity of 250 million cans per year. #### Short-Run Effects: 1. **Demand Shift:** - Due to the CDC announcement, consumers will demand less tuna at every price. - This will cause a leftward shift in the demand curve. 2. **New Short-Run Equilibrium:** - The intersection of the new demand curve with the supply curve will determine the new equilibrium price and quantity in the short run. - Firms will decrease prices in response to the reduced demand. 3. **Visuals:** - The graph will have a new intersection point showing a decreased equilibrium quantity and a decreased equilibrium price. This scenario illustrates the basic economic principles of market equilibrium and the impact of external factors on demand.
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