Assume that the egg industry is perfectly competitive and is in long-run equilibrium with a perfectly elastic long-run industry supply curve. Health concerns about cholesterol then lead to a decrease in demand. Construct a figure similar to Figure 12-7, showing the short-run behavior of the industry and how long-run equilibrium is reestablished.

Figure 12-7:

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Price, (a) Existing Firm Response to Increase in Demand cost $72 56 An increase in demand raises price and profit. MC Price (b) Short-Run and Long-Run Market Response to Increase in Demand Price, cost Long-run industry supply S curve, LRS ATC Yo X ZMAT D D Quantity 0 QxQr (c) Existing Firm Response to New Entrants Higher industry output from new entrants drives price and profit back down. MC 'Y ATC Q Quantity 0 Quantity Increase in output from new entrants Krugman/Wells, Economics, e, 2021 Worth P