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2. (12 points) The demand for shrimp has been rising and this growth is expected to accelerate as beef and pork prices increase and people seek meat substitutes. While some shrimp is caught wild, the majority of marketed shrimp is farmed. a. In the space below, draw two graphs side-by-side (or embed a photo of a hand-drawn picture, not an image from online somewhere). In the first graph, show the market supply and demand for shrimp in equilibrium, clearly indicating equilibrium price and quantity. In the second, show a graph of a representative shrimp farmer’s marginal cost and average total cost. Show the farmer’s profit maximizing level of output (q*) at the market equilibrium price, assuming this market is perfectly competitive and that zero economic profits are being earned by individual producers initially. b. In the first graph you drew for part (a), show the impact of the change in demand that is occurring in the market for shrimp, clearly labeling the new equilibrium price and quantity. In your second graph, illustrate how the change in market demand affects the representative shrimp farmer, clearly showing what effect the change in demand has on the individual farmer’s output (q’). c. What happens to profit for the individual shrimp farmer? d. In the long run, would this sort of change in demand, assuming it persists, induce entry into the shrimp farming industry, exit from this industry, or neither entry nor exit?

          2. (12 points) The demand for shrimp has been rising and this growth is expected to accelerate as beef and pork prices increase and people seek meat substitutes. While some shrimp is caught wild, the majority of marketed shrimp is farmed.

a. In the space below, draw two graphs side-by-side (or embed a photo of a hand-drawn picture, not an image from online somewhere). In the first graph, show the market supply and demand for shrimp in equilibrium, clearly indicating equilibrium price and quantity. In the second, show a graph of a representative shrimp farmer’s marginal cost and average total cost. Show the farmer’s profit maximizing level of output (q*) at the market equilibrium price, assuming this market is perfectly competitive and that zero economic profits are being earned by individual producers initially.

b. In the first graph you drew for part (a), show the impact of the change in demand that is occurring in the market for shrimp, clearly labeling the new equilibrium price and quantity. In your second graph, illustrate how the change in market demand affects the representative shrimp farmer, clearly showing what effect the change in demand has on the individual farmer’s output (q’).

c. What happens to profit for the individual shrimp farmer?

d. In the long run, would this sort of change in demand, assuming it persists, induce entry into the shrimp farming industry, exit from this industry, or neither entry nor exit?

2. (12 points) The demand for shrimp has been rising and this growth is expected to accelerate as beef and pork prices increase and people seek meat substitutes. While some shrimp is caught wild, the majority of marketed shrimp is farmed.

a. In the space below, draw two graphs side-by-side (or embed a photo of a hand-drawn picture, not an image from online somewhere). In the first graph, show the market supply and demand for shrimp in equilibrium, clearly indicating equilibrium price and quantity. In the second, show a graph of a representative shrimp farmer’s marginal cost and average total cost. Show the farmer’s profit maximizing level of output (q*) at the market equilibrium price, assuming this market is perfectly competitive and that zero economic profits are being earned by individual producers initially.

b. In the first graph you drew for part (a), show the impact of the change in demand that is occurring in the market for shrimp, clearly labeling the new equilibrium price and quantity. In your second graph, illustrate how the change in market demand affects the representative shrimp farmer, clearly showing what effect the change in demand has on the individual farmer’s output (q’).

c. What happens to profit for the individual shrimp farmer?

d. In the long run, would this sort of change in demand, assuming it persists, induce entry into the shrimp farming industry, exit from this industry, or neither entry nor exit?

Added by Ismael P.

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