Homework (Ch 14) Due on Dec 10 at 11 PM EST 8. Short-run and long-run effects of

Question

Homework (Ch 14) Due on Dec 10 at 11 PM EST 8. Short-run and long-run effects of a shift in demand Suppose that the shrimp Industry is in long-run equilbrium at a price of $5 per pound of shrimp and a quantity of 300 million pounds per year Suppose that WebMD claims that a protein found in shrimp will Increase your expected lifespan by 4 years WebMD's clalm will cause consumers to demand shrimp at every price. In the short run, firms will respond by less more Shift the demand curve, the supply curve, or bo ofollowing graph to illustrate these short-run effects of WebMD's claim. 10 Su Demand Supply 0 60 120 180 240 300 360 420 480 540 600 QUANTITY (Millions of pounds) In the long run, some firms will respond by until

Explanation / Answer

i) more

ii) producing same amount of shripm earning positive profit

iii)entering the industry

iv)each firm is once again earning zero profit

v) vertical

In the short run when the demand increases the demand curve shifts upward and goods are sold at higher prices giving firms opportunity to earn positive profit, seeing this many firms enter into the market which increases supply of goods hence prices comes down and once again the economic profit is zero. In the long run supply curve is vertical.

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