Suppose the restaurant industry is perfectly competitive. All producers have identical cost curves and the industry is currently in long-run equilibrium, with each producer producing at its minimum long-run average total cost of $8.

a. If there is a sudden increase in demand for restaurant meals, what will happen to the price of a restaurant meal? How will individual firms respond to the change in price? Will there be entry or exit from the industry? Explain.

b. In the market as a whole, will the change in the equilibrium quantity be greater in the short-run or the long-run? Explain.

c. Will the change in output on the part of individual firms be greater in the short-run or the long- run? Explain and reconcile your answer to part (b).

Explanation:

A. Supply stays the same, demand decreases since restaurants are normal goods. As a result, the equilibrium price and the equilibrium quantity will go down.

B. In the short run, the existing firms reduce their output causing Q* to fall. In the long run, as firms exit, Q* falls even further.

C. An individual firm may produce in the short run, but exit from the industry in the long run. As a result, the firm will decrease its quantity produced up to 0. Therefore, in the long run the output of an individual firm may change drastically comparing with the short run.

answer; ///i believe the correct   answer is (e) transformational;

lbc corporation makes and sells a product called product wz. each unit of product wz requires 4.1 hours of direct labor at the rate of $20.00 per direct labor-hour. management would like you to prepare a direct labor budget for june. the company plans to sell 28,000 units of product wz in june. the finished goods inventories o