OPTIONS FOR THE MULTIPLY CHOICE QUESTIONS ARE BELOW Keep the Highest: Attempts:

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OPTIONS FOR THE MULTIPLY CHOICE QUESTIONS ARE BELOW

Keep the Highest: Attempts: 8. Short-run and long-run effects of a shift in demand Suppose that the turkey industry is in long-run equilibrium at a price of $5 per pound of turkey and a quantity of 100 million pounds per year. Suppose the Surgeon General issues a report saying that eating turkey is bad for your health The Surgeon Generals report will cause consumers to demand turkey at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following diagram to ilustrate these short-run effects of the Surgeon Generals report. 10 Demand Supply 5_ nd 0 20 40 60 80 100 120 140 180 180 200 QUANTITY (Millions of pounds) In the long run, some firms will respond by until

Explanation / Answer

(a) Surgeon's announcement will cause consumers to demand less turkey. In short run, producers respond by producing less turkey and running a loss.

In the long run, firms will respond by exiting the industry until each firm is once again earning zero profit.

NOTE: Your graph is interactive and I cannot access it. Manually drawing a graph will not make it possible to understand how much the demand curve or supply curve will shift, or if long run supply curve i upward or horizontal. It is built-in in your graph tool.

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