The accompanying graphs represent the market for soybeans, a perfectly (purely) competitive market, and Roy's Soys, an individual firm in the market for soybeans. The market and the firm are currently in long-run equilibrium at point A. Soybean market Roy's Soys 20 20 Price 2 B. Price 3 19 19 Marginal cost 18 Short-run supply 18 17 17 16 16 15 15 14 14 13 13 12 12 * 11 * 11 Average total cost 10 A 10 A Long-run supply Price 8. 8. 7 6. 6. 3 2 Demand 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (hundreds of bushels) 1. Show what happens in the short run on both graphs when a new medical study shows soybeans to be highly carcinogenic. On the market graph, you will shift a curve or curves. On the firm's graph, use Price 2 to draw a new price line for the firm. On both graphs, indicate the new equilibrium point with point B. 2. Now, show the changes that get both graphs back to long-run equilibrium. Use shift(s) for the market and Price 3 for the firm. Indicate the new long-run equilibrium with point C. Price ($)

The accompanying graphs represent the market for soybeans, a perfectly (purely) competitive market, and Roy's Soys, an individual firm in the market for soybeans. The market and the firm are currently in long-run equilibrium at point A. Soybean market Roy's Soys 20 20 Price 2 B. Price 3 19 19 Marginal cost 18 Short-run supply 18 17 17 16 16 15 15 14 14 13 13 12 12 * 11 * 11 Average total cost 10 A 10 A Long-run supply Price 8. 8. 7 6. 6. 3 2 Demand 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (millions of bushels) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity (hundreds of bushels) 1. Show what happens in the short run on both graphs when a new medical study shows soybeans to be highly carcinogenic. On the market graph, you will shift a curve or curves. On the firm's graph, use Price 2 to draw a new price line for the firm. On both graphs, indicate the new equilibrium point with point B. 2. Now, show the changes that get both graphs back to long-run equilibrium. Use shift(s) for the market and Price 3 for the firm. Indicate the new long-run equilibrium with point C. Price ($)

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 15CQ

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