Assume that the market for beef is perfectly competitive. Beef producers are cur

Question

Assume that the market for beef is perfectly competitive.  Beef producers are currently earning a zero economic profit.  If consumers switch from beef to chicken, which of the following is most likely to occur?

Beef producers will now incur economic losses in both the short run and the long run.

Beef producers will incur economic losses in the short run.  Some producers will exit the industry until those remaining are earning a zero economic profit.

Beef producers will incur economic losses in the short run.  Some producers will exit the industry until those remaining are earning an economic profit.

Beef producers will now earn economic profits in the short run and there will be no additional adjustments in the long run.

Beef producers will now incur economic losses in both the short run and the long run.

Beef producers will incur economic losses in the short run.  Some producers will exit the industry until those remaining are earning a zero economic profit.

Beef producers will incur economic losses in the short run.  Some producers will exit the industry until those remaining are earning an economic profit.

Beef producers will now earn economic profits in the short run and there will be no additional adjustments in the long run.

Explanation / Answer

Answer

Beef producers will incur economic losses in the short run.  Some producers will exit the industry until those remaining are earning a zero economic profit

The increase in the demand of substitute goods shifts demand curve for beef to the left which decreases price and quantity in the market but the costs are same so some of the firms incur losses

profit=(P-ATC)*Q

old, profit=0 and new profit<0

because the ATC is same at both time but the price decreases in the net profit.

this effect on some of the firms and these firm leave the market which will decrease supply and the supply shifts to the left and the price increases which will come into long-run equilibrium.

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