# The accompanying graphs represent the soy bean market, a competitive market and Roy's Soys, an individual firm in themarket for soy beans. The soy bean market graph depicts the short-run supply (SRS), long-run supply (LRS), and demand(D). The graph for Roy's Soys represents marginal consts (MC) and average costgs (AC). The market and the firm arecurrently in long-run equilibrium at point A.a. Demonstrate what happens in the short run on both graphs when a new medical study shows soy beans to be an effectiveweight-loss supplement. On the market graph, you will shift a curve (or curves). On the firm's graph, use "Price 2" to drawa new price line for the firm. On both graphs, indicate the new equilibrium points with the points labeled B.b. Now, demonstrate the changes that get both graphs back to long run equilibrium. Use shift(s) for the market and "Price3" for the firm. Indicate the new long-run equilibrium with the green points labeled C. Soy Bean MarketRoy's SoysPrice 32020Price 219SRS19MCC.18181717AC1616151514141313121211111010LRSPrice440 1 2 34 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20Quantity (millions of bushels)0 1 2 3 4 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20Quantity (millions of bushels)Price (S)Price (S)

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Step 1

The increase in demand for Soybeans shifts the demand curve to rightward (D2). It intersects the supply curve at B with the higher market price 2. The firm accept this price and equalize the price with marginal cost curve at point B.

Step 2

In the long run, the higher price encourages the producers to produce more goods in the market. Thus, it shift...

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