The accompanying graphs represent the soy bean market, a competitive market and Roy's Soys, an individual firm in the market for soy beans. The soy bean market graph depicts the short-run supply (SRS), long-run supply (LRS), and demand (D). The graph for Roy's Soys represents marginal consts (MC) and average costgs (AC). The market and the firm are currently in long-run equilibrium at point A. a. Demonstrate what happens in the short run on both graphs when a new medical study shows soy beans to be an effective weight-loss supplement. 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 points with the points labeled B. b. Now, demonstrate 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 the green points labeled C. Soy Bean Market Roy's Soys Price 3 20 20 Price 2 19 SRS 19 MC C. 18 18 17 17 AC 16 16 15 15 14 14 13 13 12 12 11 11 10 10 LRS Price 4 4 0 1 2 3 4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) 0 1 2 3 4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) Price (S) Price (S)
The accompanying graphs represent the soy bean market, a competitive market and Roy's Soys, an individual firm in the market for soy beans. The soy bean market graph depicts the short-run supply (SRS), long-run supply (LRS), and demand (D). The graph for Roy's Soys represents marginal consts (MC) and average costgs (AC). The market and the firm are currently in long-run equilibrium at point A. a. Demonstrate what happens in the short run on both graphs when a new medical study shows soy beans to be an effective weight-loss supplement. 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 points with the points labeled B. b. Now, demonstrate 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 the green points labeled C. Soy Bean Market Roy's Soys Price 3 20 20 Price 2 19 SRS 19 MC C. 18 18 17 17 AC 16 16 15 15 14 14 13 13 12 12 11 11 10 10 LRS Price 4 4 0 1 2 3 4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) 0 1 2 3 4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) Price (S) Price (S)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The accompanying graphs represent the soy bean market, a competitive market and Roy's Soys, an individual firm in the
market for soy beans. The soy bean market graph depicts the short-run supply (SRS), long-run supply (LRS), and demand
(D). The graph for Roy's Soys represents marginal consts (MC) and average costgs (AC). The market and the firm are
currently in long-run equilibrium at point A.
a. Demonstrate what happens in the short run on both graphs when a new medical study shows soy beans to be an effective
weight-loss supplement. 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 points with the points labeled B.
b. Now, demonstrate 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 the green points labeled C.
Transcribed Image Text:Soy Bean Market
Roy's Soys
Price 3
20
20
Price 2
19
SRS
19
MC
C.
18
18
17
17
AC
16
16
15
15
14
14
13
13
12
12
11
11
10
10
LRS
Price
4
4
0 1 2 3
4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20
Quantity (millions of bushels)
0 1 2 3 4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20
Quantity (millions of bushels)
Price (S)
Price (S)
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