A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer.

A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Perfect Competition

Section: Chapter Questions

Problem 13QP

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A new korean restaurant opens in a city. People are initially cautious about eating newfood items, until an influential health report warns consumers against korean foodsuggest that they decrease their consumption of Korean foods. As a result, demand forKorean cuisine decreases dramatically.Assuming that the market for Korean food is perfectly competitive, answer thequestions below.a. In the story above, what should have happened to the short-run economic loss of theKorean restaurant as a result of the health report?
A new korean restaurant opens in a city. People are initially cautious about eating newfood items, until an influential health report warns consumers against korean foodsuggest that they decrease their consumption of Korean foods. As a result, demand forKorean cuisine decreases dramatically.Assuming that the market for Korean food is perfectly competitive, answer thequestions below.a. In the story above, what should have happened to the short-run economic loss of theKorean restaurant as a result of the health report?b. Assuming that demand remains low, what do you anticipate will happen to thenumber of korean restaurants in the city over the long run?c. Would you predict that the first korean restaurant would be able to still running inloss over the long run? Explain your answer.d. Using one graph of the market as a whole and one graph of a representative firm'scost curves, illustrate your answers to parts a - c. (Draw diagram of a, b and c and labelyour diagram).e. Local…
b) Explain what the assumption of free entry and exit in a perfectly competitive market implies for the long run competitive equilibrium?