Suppose that the checker industry is in long-run equilibrium at a price of $5 pe

Question

Suppose that the checker industry is in long-run equilibrium at a price of $5 per pound of chicken find a quantity of 3SO million pounds per year. Suppose that Web MO claims that the bacteria found in chicken will decrease your expected life span by 3 years. WebMD's claim will cause consumers to demand chicken at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following diagram to these short-run effects of WebMD's claim. Shift the demand curve, the supply curve, or both on the following diagram to frustrate both the short-run effects of WebMD's charm and the new long-run equilibrium after firms and consumers finish adjusting to the news. The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry i$ in the long run.

Explanation / Answer

WebMD's claim will cause consumers to demand less quantity of Chicken at every price. In the short run, firms will respond by producing less quantity of Chicken for the consumers and thus firms will be facing losses in the short-run.

In the long-run, some firms will respond by leaving the chicken industry until the firms are in position to earn the profits.

The new equilibrium price and quantity suggest that the shape of the long-run supple curve in this industry slopes upward to the right in the long-run.

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