Consider a wild rice producer in a competitive wild rice industry. Suppose that the demand for wild rice increases.Part 2What will be the adjustments made by the firm and the industry?

(Check

all that

apply.)

A.

In the long run, the market supply curve shifts rightward, further increasing industry output but lowering the market price.

B.

In the long run, the market supply curve shifts leftward, further decreasing industry output but increasing the market price.

C.

In the short run, the market demand curve shifts to the left, decreasing the market price and decreasing the equilibrium quantity.

D.

In the short run, the market demand curve shifts to the right, raising the market price and increasing the equilibrium quantity.

Part 3The firm will make

zero

a positve

economic profit in the long run.Part 4Now, suppose that demand increases again but that the government forbids entry by new wild rice producers.Part 5What are the adjustments made by the firm and the industry?

(Check

all that

apply.)

A.

In the short run, the market demand curve shifts to the right, raising the market price and increasing the equilibrium quantity of wild rice.

B.

In the short run, the market demand curve remains fixed.

C.

In the long run, the market supply curve shifts leftward as the government forbids new entry.

D.

In the long run, the existing firms in the industry will expand capacity.

Part 6The firm will make

zero

a positive

economic profit.Part 7The firm's economic profit is higher when entry is

allowed

forbidden

.

Part 8What is the managerial lesson illustrated in your answer to the scenarios described above?

A.

In a perfectly competitive industry, economic profits are possible even if more firms enter the market and lower price.

B.

In a perfectly competitive industry, economic profits cannot last because firms will enter the market, increasing output and lowering price.

C.

In a perfectly competitive industry, economic profits cannot last because consumers will exit the market, decreasing output and lowering price.

D.

In a perfectly competitive industry, economic profits are possible even if firms exit the market and lower price.