The following questions are about long-run equilibrium in the market for cage-free eggs.
a. As described in the chapter opener, in 2017 was the market for cage-free eggs in long-run equilibrium? Briefly explain.
b. What would we expect to happen to the price of cage free eggs and the quantity of cage-free eggs produced in the long run? Briefly explain.
c. As of 2017, the U.S. Department of Agriculture (USDA) did not have detailed guidelines for egg farmers to follow before they could claim that the eggs they sell were laid by cage-free chickens. Some animal rights activists were pushing for the USDA to enact stricter guidelines than many egg farmers were following voluntarily. Such guidelines would be likely to significantly raise the cost of producing cage-free eggs. Suppose that the USDA begins to require these stricter guidelines. What effect will this increase in cost have on the long-run price of cage-free eggs? In the long run, will the quantity of cage-free eggs be larger, smaller, or the same as it would have been without the USDA adopting the guidelines? Briefly explain.