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An improvement in cashew harvesting technology lowers the per unit cost of cashew production by $3 / pound. As a result, the market price and quantity become:
P** = $2 / pound Q** = 100 pounds of cashews
The number of firms remains at fifty (50). In the SAME set of graphs from (a), depict these changes in the cashew industry. Be sure to identify q** in your firm diagram even as you show and explain how this technological advance affects any curve(s) in both the market and firm diagrams. Why is this industry now not in long run equilibrium? Explain.
As a result of this technological improvement, the representative firm's output level _________ in the short run, and it ___________ make positive economic profit.
a. Falls ; does
b. Falls ; does not
c. Rises ; does
d. Rises ; does not
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