The market for beef is in long-run equilibrium at $3.25 per pound.The announcement that mad cow disease has been discovered in the United States reduces the demand for beef sharply,and the price falls to $2.00 per pound.If the long-run supply curve is horizontal,when the long-run equilibrium is reestablished,the price will be:

Question

Quizplus · Accepted Answer

If the long-run supply curve is horizontal, it indicates that the supply is perfectly elastic. This means that suppliers are willing to supply any quantity at a fixed price. Therefore, even after a temporary shock like the discovery of mad cow disease, when the market adjusts back to long-run equilibrium, the price will return to its original level of $3.25 per pound, assuming no other changes in the market conditions.

The Market for Beef Is in Long-Run Equilibrium at $3