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Agriculture + Resrce Econ
AREC 202
Christopher Goemans

18 November What would happen to the market for steak if the price of steak sauce went down? Short run & long run In the short run, market demand rises, price rises, MR for individual rises. You don’t make more because MC > MR. You don’t produce less because MC < MR. You produce where MC = MR. TC = Q x ATC In the long run, more producers will enter the market, driving the price down. Price falls all the way back to the breakeven price (no economic profit) Step 1: In the market, demand shifts out and equilibrium price goes up Step 2: As a result, individual producers see large economic profit Step 3: People enter the market until prices fall to their original levels (due to the presence of economic profit) Step 1 is an exogenous shock. Producers didn’t change price, or anythin
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