Explain how the following factors will shift the supply curve for ...

[student77]

Explain how the following factors will shift the supply curve for sparkling wine:
 
  a. New irrigation technology improves the average yield of a vineyard.
  b. Following an increase in the immigration of unskilled labor, the wages of wine-grape pickers fall.
  c. The government sets a minimum wage for seasonal employment.

Question 2

Why cannot firms leave the industry in the short run?
 
  What will be an ideal response?

[scottmt]

Answer to Question 1

a. With an increase in yield, the supply curve of grapes used to make sparkling wine will shift to the right. The price of grapes will fall. Since the price of an input falls, the supply curve for sparkling wine will shift to the right.
b. A fall in the wages of wine-grape pickers implies that the cost of producing sparkling wine has decreased. The supply curve for sparkling wine will shift to the right.
c. A minimum wage is likely to be higher than the equilibrium wage. Since wine-grape picking is a seasonal occupation, the wage paid to a wine-grape picker is likely to increase. This will shift the supply curve to the left.

Answer to Question 2

In the short run, the firm has at least one input that is fixed. Therefore, while the firm can shut down in the short run, it cannot get rid of its fixed costs. Fixed costs must be paid in the short run.

[student77]

Excellent

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