Question

8. Short-run and long-run effects of a shift in demand

Suppose that the chicken industry is in long-run equilibrium at a price of $ 5 per pound of chicken and a quantity of 50 million pounds per year. Suppose that WebMD claims that the bacteria found in chicken will decrease your expected lifespan 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 graph to illustrate these short-run effects of WebMD's claim.

In the long run, some firms will respond by _______  until _______ .

Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of WebMD's claim and the new longrun 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 is _______ in the long run.

Answer 1

As it decreases the lifespan so it's bad and the demand will decrease

Blanks-

1) less

2) producing less chicken and running at a loss

Supply Demand Supply PRICE (Dollars per pound) Demand 0 10 20 90 100 30 40 50 60 70 80 QUANTITY (Millions of pounds)

3) Exiting the industry

4) each firm in the industry is once again earning zero profit

Supply Demand Supply PRICE (Dollars per pound) Demand 0 10 20 80 90 100 30 40 50 60 70 QUANTITY (Millions of pounds)

5) Horizontal