10. The first sushi restaurant opens in town. Initially, people are very cautiou
ID: 1216379 • Letter: 1
Question
10. The first sushi restaurant opens in town. Initially, people are very cautious about eating tiny portions of raw fish, as this is a town where large portions of grilled meat have always been popular. Soon, however, an influential health report warns consumers against grilled meat and suggests that they increase consumption of fish, especially raw fish. The sushi restaurant becomes very popular and its profit increases. a. What will happen to the short-run profit of the sushi restaurant? What will happen to the number of sushi restaurants in town in the long run? Will the first sushi restaurant able to sustain its short run profit over the long run? b. Local steakhouses suffer from the popularity of sushi and start incurring losses. What will happen to the number of steakhouses in town in the long run? Explain your answer.
Explanation / Answer
a.
The short run profit of the Sushi restaurant will increases, including other to start Sushi restaurants. The restaurants will be increases in town. Over the time the equilibrium price will fall lowering the short run profit of the original sushi restaurants.
b.
The stakeholders will be reduces in long run as owner gets losses and exit from the industry.
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