Suppose that the ziratoid industry is initially operating in long-run equilibrium at a price level of $6 per pound of ziratoid and quantity of 108 million pounds per year. Suppose a leading foodie video blogger raises awareness for a scholarly article that links ziratoid consumption to premature hair loss and unhealthy skin. The viral video is expected to cause consumers to demand ziratoid at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the viral video. ? PRICE (Dollars per pound) 12 11 Supply 10 O | } Demand 2 1 0 18 36 54 Demand 72 90 108 120 144 162 180 198 216 QUANTITY (Millions of pounds) In the long run, some firms will respond by Supply until

Suppose that the ziratoid industry is initially operating in long-run equilibrium at a price level of $6 per pound of ziratoid and quantity of 108 million pounds per year. Suppose a leading foodie video blogger raises awareness for a scholarly article that links ziratoid consumption to premature hair loss and unhealthy skin. The viral video is expected to cause consumers to demand ziratoid at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the viral video. ? PRICE (Dollars per pound) 12 11 Supply 10 O | } Demand 2 1 0 18 36 54 Demand 72 90 108 120 144 162 180 198 216 QUANTITY (Millions of pounds) In the long run, some firms will respond by Supply until

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

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 17CQ

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Suppose you are managing a farming company, which is one of the major producers of Tomato in the State of North Carolina. You have been provided with the following graph which shows the demand curve for the tomatoes that your company is producing. As you can see, there are two known points (X and Y) on a demand curve for tomatoes. According to the “standard" method of computing elasticity (i.e. use the standard formula of percentage change in your computations), the standard-method price elasticity of demand for tomatoes when moving from point X to point Y is approximately Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of pounds of tomatoes)
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Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Mo's HookNLadder. As the graph shows, in order to sell the additional fire truck, Mo must lower the price from $80,000 to $60,000 per truck. Notice that Mo gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial eight engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $60,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $60,000. PRICE (Thousands of daars perfe Mo 2*** 110 150 1 QUANTITY (Fe engines . Demand . Revenue Lost Revenue Ganed Increase…
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Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced four trucks, but then decided to increase production to five trucks. The following graph gives the demand curve faced by Jabari’s HookNLadder. As the graph shows, in order to sell the additional fire truck, Jabari must lower the price from $105,000 to $90,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial four engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000