Tang company accumulates the following data concerning raw materials in making its finished product: (1) price per pound of raw materials—net purchase price $2.50, freight-in $0.30, and receiving and handling $0.20. (2) quantity per gallon of finished product—required materials 3.60 pounds, allowance for waste and spoilage 0.90 pounds.

compute the following.

(round answers to 2 decimal places)

a) standard direct materials price per gallon.
b) standard direct materials quantity per gallon.
c) total standard materials cost per gallon.

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.