Question

Suppose five years from now that the ranching industry is in long-run equilibrium at 70 cents per pound. graphically illustrate what that would look like for the ranching industry using side-by-side industry and firm graphs. then, suppose a new hormone shot is developed at texas a&m university that allows all ranchers to cut their feed costs by 27 percent if they use this shot. graphically illustrate the short-run implications of this development in the ranching industry using a new set of side-by-side industry and firm graphs. explain your answer. graphically illustrate the long-run implications of this development in the ranching industry using a new set of side-by-side industry and firm graphs. explain your answer.

Answer 1

Answer:  
1.a. AD curve should cross LRAS ar 70c per pound at a specific quantity. LRAS is vertical and AD is downward sloping. If you include SRAS, it slopes upwards and crosses where the 2 lines cross. If you include LRAD, it will be horizontal and cross where the lines cross  
2. a. when the hormone shot is induced, SRAS becomes more elastic i.e. it pivots to the right. As cost to feed become cheaper, more can be supplier at any given price level. However, as the quantity is not a fixed boost, the increase is a proportional 27%  
b. LRAS is still vertical, however, it shifts to the right, where the new SRAS meets the AD curve. The effect is long term so there will be permanent change to the equilibrium of the quantitiy supplied as well as the price. 
LRAD will also lower due to the change. 
SRAD stays where it is