demand for cranberries raises the price to $6 per pound in a matter of a few weeks a Illustrate the increase in demand in the market and in the case of a typical firm in the short run b Illustrate what happens in the long run in this industry Assuming that the cost per unit of production remains unchanged throughout, what will the new price be? c Now suppose that the industry is permitted to organize all firms into a producers’ cooperative that maximizes profits Starting with the solution that you had in (b), illustrate the impact of this change on industry price and output Again, consider the market for cranberries The industry is perfectly competitive and the price of cranberries is $4 per pound Suppose a reduction in the cost of obtaining water reduces the variable and average total cost by $1 per pound at all output levels a Illustrate graphically the impact of the change in the short run Will the price fall by $1? Why or why not? b Now show the impact of the $1 reduction in cost in the long run Who benefits from the reduction in cost? c Assume again that the producers in the industry are permitted to band together in a cooperative that maximizes profits Now show the short run impact of the cost reduction on the price and output of cranberries d Now show the long run impact of the change Who benefits from the reduction in cost? Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 779