7. The long-run supply curve in different cost industries The following graph sh

Question

7. The long-run supply curve in different cost industries The following graph shows the market for milk. Initially, the market is in a long-run equilibrium Suppose that a change in tastes resulted in a rightward shift in demand On the following graph, shift the demand or supply curve to reflect this change in tastes. Then use the grey point (star symbol) to indicate the new short-run equilibrium. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther 10 Short-run Supply Demand Short-run Supply 4 Short-run Equilibrium mand Long-run Equilibrium 4 10 Long-run Supply QUANTITY (Thousands of gallons)

Explanation / Answer

In the short run, firm will suffer economic losses because the supply will not be changed and the supply curve will remain unchanged. The milk market is an example of increasing cost industry.

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