Answered: The graph titled Soy Bean Market is a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The graph titled Soy Bean Market is a graph of the market for soy beans, a perfectly (purely) competitive market. The graph titled Roy's Soys depicts an individual firm in the market for soy beans. The market and the firm are currently in long-run equilibrium at Point A.

Show 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, 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.

Now, show the changes that get both graphs back to long-run equilibrium. Shift the appropriate curve(s) for the market and "Price 3" for the firm. Indicate the new long-run equilibrium with the points labeled C.

The graph titled Soy Bean Market is a graph of the market for soy beans, a perfectly (purely) competitive market. The graph
titled Roy's Soys depicts an individual firm in the market for soy beans. The market and the firm are currently in long-run
equilibrium at Point A.
Show 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, 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.
Now, show the changes that get both graphs back to long-run equilibrium. Shift the appropriate curve(s) for the market and
"Price 3" for the firm. Indicate the new long-run equilibrium with the points labeled C.
Soy Bean Market
Roy's Soys
20
20
Price 2
19
19
B.
18
17
17
Price 3
16
16
15
15
14
14
Short-run supply
|Average total cost
13
13
12
12
11
11
10
10
A
Long-run supply
Price
9.
7
6
5
4
Demand
Marginal cost
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)
요으0N 65 4 32 1 0 9 8 7 65 4 3 2 1 0
Price ($)
Price ($)
3 2 1 0

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