10. The long-run supply curve in different cost industries Aa Aa Consider the ma

Question

10. The long-run supply curve in different cost industries Aa Aa Consider the market for mueslil bars, which is a perfectly competitive market. Imagine that tastes shift away from muesli bars so that the market demand curve shifts leftward. Answer the following questions about the effect of this change in tastes assuming external economies are present The following graph shows the market for annual mueslil bar consumption. Initially, the market is in a long-run equilibrium at point D. After the change in tastes and the leftward shift in demand, the market moves to point in the short run. In the long run, the supply curve shifts from S1 to S2, which causes the market to move to point in the long run PRICE (Dollars per box 10 Long-Run Supply S2 S1 468 10 QUANTITY IThousands ot bexes per yearl p Clear AS Comparing the two long-run equilibria on the graph, you can see that the muesl bar market is an example of

Explanation / Answer

After the change in demand, the market equilibrium moves from point D to point C in the short run.

In the long run when supply curve moves from S1 to S2, the point moves to point B in the long run.

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