The accompanying graphs represent the market for soybeans, a perfectly (purely) competitive market, and Roy's Soys, an individual firm in the market for soybeans. The market and the firm are currently in long-run equilibrium at point A. 1. Show what happens in the short run on both graphs when a new medical study shows soybeans to be highly carcinogenic. On the market graph, you will shift a curve or curves. On the firm's graph, use Price 2 to draw a new price line for the firm. On both graphs, indicate the new equilibrium point with point B. 2. Now, show the changes that get both graphs back to long-run equilibrium. Use shift(s) for the market and Price 3 for the firm. Indicate the new long-run equilibrium with point Soybean market 20 B 20 Price 2 B Roy's Soys Price 3 19 . Short-run supply 19 Marginal cost 18 18 17 17 16 10 16 15 15 14 14 13 13 12 12 Price ($) ค. 11 11 10 A Long-run supply 810 Average total cost Price 9 8 7 6 5 5 8 7 7 b 5 5 4 3 4 3 3 2 Demand 2 1 1 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (hundreds of bushels)
The accompanying graphs represent the market for soybeans, a perfectly (purely) competitive market, and Roy's Soys, an individual firm in the market for soybeans. The market and the firm are currently in long-run equilibrium at point A. 1. Show what happens in the short run on both graphs when a new medical study shows soybeans to be highly carcinogenic. On the market graph, you will shift a curve or curves. On the firm's graph, use Price 2 to draw a new price line for the firm. On both graphs, indicate the new equilibrium point with point B. 2. Now, show the changes that get both graphs back to long-run equilibrium. Use shift(s) for the market and Price 3 for the firm. Indicate the new long-run equilibrium with point Soybean market 20 B 20 Price 2 B Roy's Soys Price 3 19 . Short-run supply 19 Marginal cost 18 18 17 17 16 10 16 15 15 14 14 13 13 12 12 Price ($) ค. 11 11 10 A Long-run supply 810 Average total cost Price 9 8 7 6 5 5 8 7 7 b 5 5 4 3 4 3 3 2 Demand 2 1 1 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (hundreds of bushels)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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