Answered: 4. Read the following article: Your…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Read the following article: Your Avocados and Olives Are Pricier Because Fat Is In Fashion. a. In one to three sentences, briefly summarize the main point(s) of this article. The increase and popularity of healthy fatty food like avocados, butter, olive oil, and salmon are making these products spike in price because of their popularity. b. Draw two graphs side by side (like in problem 3 above) for an individual firm in a competitive market and the accompanying market. Draw them so they are in long run equilibrium initially. c. In the article, it mentions that the producers of avocados, fish, and butter are struggling to increase output (quantity supplied). Why? There was such a high rate of interest in these products in such a short amount of time, the companies weren’t able to fill the orders fast enough. d. Draw the effect described in part d on your graph of the market in part c. e. What happened to the equilibrium price as a result? What does the article say has happened to average prices in these markets since 2013? Average prices have doubled for Salmon, and Olive oil f. Looking at your graph in part c: As a result of the change in market prices, what happens to the quantity each individual firm supplies? What kind of profits (positive, negative, or zero) are these firms receiving? g. Again, thinking about your graph and not the article: In the long run, what will happen as a result of these profits mentioned in part g? h. According to the article, what is true about olives, avocados and almonds that might cause the long run to take a really long time to arrive? Time plays a huge factor because it will take time to develop and grow the trees, and then even more time to produce the fruit and the product needed. i. Thinking of your graph again: As more firms enter the market in the long run, what should happen to the price in the market? With more companies producing the same product, the price would start to decrease. j. Salmon has experienced this same increase in demand. “From 1998 to 2008, global salmon production grew an average of ___7.7______% a year.” Since then, though, the growth rate has been a lot slower. This has been caused by something that has increased the costs of (basically) all salmon producers. What are a couple of things that have happened at some salmon fisheries that have increased costs? (one is a disease and the other has a specific example in Norway and Scotland.) Some of these fisheries in Norway and Scotland are having problems with sea lice and with a huge population of salmon, this parasite will cause damage to the fish. These two countries have also limited the creation of farms, so with the parasite happening, new farms aren’t able to open to help out. k. These increased costs in production affecting all salmon producers will lead to a new long run equilibrium price that is ________Higher_________ than before. This leads to an ______Upward______________-sloping long run supply curve for salmon.

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