What statement explains why the PPC for ice cream and frozen yogurt is a straight line instead of a curve?
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Suppose that a change in tastes resulted in a rightward shift in demand. On the following graph, shift the demand or supply curve to reflect this change in tastes. Then use the grey point (star symbol) to indicate the new short-run equilibrium. In the short run, firms will suffer economic losses or earn economic profits. In the long run, the supply curve will shift rightward, shift leftward, or remain unchanged. On the previous graph, show the shift in the supply curve and then use the purple point (diamond symbol) to indicate the resulting new long-run equilibrium. Comparing the two long-run equilibria on the graph, you can see that the tortilla chip market is an example of an increasing-cost industry. On the previous graph, use the green line (diamond symbols) to plot the long-run market supply curve for tortilla chips.
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