Question

Short-run and long-run effects of a shift in demand Dismiss All Please Wait . . . Please Wait... Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 150 million pounds per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in chicken is causing bacterial infections to spread around the world. The CDC’s announcement will cause consumers to demand selector 1    less more chicken at every price. In the short run, firms will respond by selector 2    producing more chicken and earning positive profit producing the same amount of chicken and earning positive profit producing the same amount of chicken and running at a loss producing less chicken and running at a loss exiting the industry entering the industry . Points: Close Explanation Explanation: Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the CDC’s announcement. Created with Raphaël 2.1.2DemandSupply0306090120150180210240270300109876543210PRICE (Dollars per pound)QUANTITY (Millions of pounds)Demand   Supply    Created with Raphaël 2.1.2 Points: In the long run, some firms will respond by selector 1    producing less chicken and earning positive profit producing less chicken and running at a loss entering the industry producing more chicken and running at a loss producing more chicken and earning positive profit exiting the industry until selector 2    each firm in the industry is once again earning zero profit chicken populations grow large enough to support more firms consumer demand returns to its original level new technologies are discovered that lower costs . Points: Close Explanation Explanation: Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the CDC’s announcement and the new long-run equilibrium after firms and consumers finish adjusting to the news. Created with Raphaël 2.1.2DemandSupply0306090120150180210240270300109876543210PRICE (Dollars per pound)QUANTITY (Millions of pounds)Demand   Supply    Created with Raphaël 2.1.2 Points: Close Explanation Explanation: The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is selector 1    vertical upward sloping downward sloping horizontal in the long .