As they do the supply curve will shift to the left

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long run, firms in the chicken industry that run a negative profit will exit the market. As they do, the supply curve willshift to the left, raising the short-run equilibrium price. This process continues until firms are once again earning zeroprofit.
Assuming the long-run price and quantity are as you found in the last problem, the chicken industry isa constant-cost industry'"between the initial long-run equilibrium quantity and the new long-run equilibriumquantity.Explanation:CloseAAn industry is considered to be aconstant-costindustryif the prices firms must pay for their inputs remain constantwhen other firms enter or exit. With constant input prices (and therefore unchanged cost curves at each firm), theprice at which each firm earns zero profit remains unchanged as entry or exit occurs.An industry is considered to be adecreasing-costindustryif the entry of new firms lowers input prices. In this case,entry causes each firm's cost curves to shift downward, so the output price at which each firm earns zero profit willdrop. (Similarly, exit of firms raises input prices, shifting cost curves upward and raising the output price at whicheach firm earns zero profit.)An industry is considered to be anincreaSing-costindustryif the entry of new firms increases input prices. In thiscase, entry causes each firm's cost curves to shift upward, so the output price at which each firm earns zero profitwill rise. (Similarly, exit of firms will lower input prices, shifting cost curves downward and lowering the output priceat which each firm earns zero profit.)In this problem, the initial long-run equilibrium price of output was $3. After the decrease in demand and thesubsequent exit of firms from the industry, the new long-run equilibrium price (where each firm once again earnszero profit) was still $3. Becausethis price is equal to the initial equilibrium price, we know that input prices musthave remained the same. Since exit has caused input prices to remain the same, this industry conforms to thedefinition of a constant-cost industry.
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10. The long-run supply curve in different cost industriesSuppose that milk is sold in a perfectly competitive market, and that tastes shift away from milk so that demandshifts leftward. Answer the following questions about the consequences of this change in tastes.The graph below shows the market for annual milk consumption, which is initially in long-run equilibrium at point O.After the change in tastes and the leftward shift in demand, the market moves to pointC "in the short run andthen to pointA "in the long run.AnswerPRICE(Dollarsper gallon)108S2Long-RunSupply'"PRICE[Dollarsper gallon)108S264264202D10201o
246810QUANTITY[GaLLons per yearl[Clear AlllHelpJo246810QUANTITYIGallonsper year!CLoseA

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