and Suppose that the tuna industry is in long-run equilibrium at a price of $5 p
ID: 1110967 • Letter: A
Question
and Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 150 million cans per year. Suppose the Public Health Agency of Canads (PHAC) Issues a report saying thet eating tuns is good for your health. The PHAC's report will cause consumers to demand tuna at every price. In the short run, firms will respond by On the graph below, shit the demand curve, the supply curve, or both on the following dlagram to lMustrate these short-run effects of the PHAC's report 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Milions of cans)Explanation / Answer
more, producing more and earning positive profits.
entering the industry, until each firm is earning zero profits.
The supply curve is upward sloping.
When the tastes and preferences of consumers change to demand more, then there is a shift in the demand curve to the right. Producers will supply more and the prices will increase. Since the industry is in long term equilibrium, the firms are earning zero profit. Since the demand is shifted to the right and prices have increased, the firms are now earning positive profits which will attract new firms. This will continue till the firms are again earning zero profits.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.