Question

Suppose that the perfectly competitive tuna industry is in long-run equilibrium at a price of $3 per can of tuna and a quantity of 600 million cans per year. Suppose the Surgeon General issues a report saying that eating tuna is bad for your health. The Surgeon General's report will cause consumers to demand tuna at every price. In the short run, firms will respond by .

Answer 1

Answer:

The surgeons general report will cause consumers to demand less tuna at every price.

Explanation:

The surgeons general report will cause consumers to demand less tuna at every price. In the short run, firms will respond by producing less and exiting the tuna industry.

In the short run, demand will fall, the demand curve will shift to the left. A decrease in demand will decrease the equilibrium price of tuna and decrease quantity.

Kindly check attachment for graphical representation of the surgeons general reports effect on the demand curve.