Question

Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 300 million cans per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in tuna is causing bacterial infections to spread around the world. The CDC's announcement will cause consumers to demand tuna 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 llustrate these short-run effects of the CDC's announcement. 10 Supply Demand Supply Demand (ugp SEpoa) 30d

Answer 1

Since tuna is declared to be harmful , so

Consumers demand less tuna at every price.

In short run, firms will respond by producing less & incurring loss

so in short run, demand curve will shift inwards towards left, with supply unchanged.

Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 300 million cans per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in tuna is causing bacterial infections to spread around the world. The CDC's announcement will cause consumers to demand tuna 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 llustrate these short-run effects of the CDC's announcement. 10 Supply Demand Supply Demand (ugp SEpoa) 30d

So in long run, firms will respond by exiting the industry until each existing firm earns zero normal profit

Long run supply curve is horizontal

Supply Demand Supply Demand 00 120 180 240 300 300 420 480 540 600 QUANTITY (Milions of cans) IH (ues od sJePal 3I

Answer 2

Since tuna is declared to be harmful , so

Consumers demand less tuna at every price.

In short run, firms will respond by producing less & incurring loss

so in short run, demand curve will shift inwards towards left, with supply unchanged.

Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 300 million cans per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in tuna is causing bacterial infections to spread around the world. The CDC's announcement will cause consumers to demand tuna 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 llustrate these short-run effects of the CDC's announcement. 10 Supply Demand Supply Demand (ugp SEpoa) 30d

So in long run, firms will respond by exiting the industry until each existing firm earns zero normal profit

Long run supply curve is horizontal

Supply Demand Supply Demand 00 120 180 240 300 300 420 480 540 600 QUANTITY (Milions of cans) IH (ues od sJePal 3I