Turkey jerky is produced and sold in a perfectly competitive increasing cost industry and buyers consider it a normal good. The incomes of turkey jerky buyers have increased.

What happens to each firm's average total cost curve and the price of turkey jerky in the long run?

Choose 1 answer:
(A) Average total cost curves don't change; the price of turkey jerky increases.
(B) Average total cost curves increase; the price of turkey jerky doesn't change
(C) Average total cost curves increase; the price of turkey jerky increases.
(D) Average total cost curves decrease; the price of turkey jerky decrease.
(E) Average total cost curves don't change; the price of turkey jerky doesn't change.

Question

Turkey jerky is produced and sold in a perfectly competitive increasing cost industry and buyers consider it a normal good. The incomes of turkey jerky buyers have increased.

What happens to each firm's average total cost curve and the price of turkey jerky in the long run?

Choose 1 answer:
(A) Average total cost curves don't change; the price of turkey jerky increases.
(B) Average total cost curves increase; the price of turkey jerky doesn't change
(C) Average total cost curves increase; the price of turkey jerky increases.
(D) Average total cost curves decrease; the price of turkey jerky decrease.
(E) Average total cost curves don't change; the price of turkey jerky doesn't change.

Accepted Answer

∻Solution∻ ‖ a ⋮ Income Increase: When the incomes of buyers increase, the demand for normal goods, such as turkey jerky, increases. ‖‖ b ⋮ Demand Shift: This increase in demand shifts the demand curve to the right. ‖‖ c ⋮ Short-Run Effect: In the short run, the increased demand leads to a higher equilibrium price and quantity. ‖‖ d ⋮ Long-Run Adjustment: In a perfectly competitive increasing cost industry, new firms enter the market due to higher prices, increasing the industry's total output. ‖‖ e ⋮ Cost Curve Shift: As new firms enter, the increased demand for inputs raises input prices, shifting each firm's average total cost (ATC) curve upward. ‖‖ f ⋮ Long-Run Equilibrium: The long-run equilibrium is reached when firms earn normal profit, where the price equals the new, higher ATC. ‖ ∻Answer∻ ⚹ (C) Average total cost curves increase; the price of turkey jerky increases. ⚹ ∻Key Concept∻ ⚹ In a perfectly competitive increasing cost industry, an increase in demand leads to higher input prices, raising each firm's average total cost curve and the product's price in the long run. ⚹ ∻Explanation∻ ⚹ The increase in buyers' incomes raises the demand for turkey jerky, causing higher prices in the short run. In the long run, new firms enter the market, increasing input demand and costs, which shifts the ATC curve upward. The new equilibrium price reflects these higher costs. ⚹◊What is the relationship between the income of buyers and the demand for turkey jerky in a perfectly competitive increasing cost industry?⍭ Generate me a similar question◊

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