Suppose the spot ask exchange rate, Sa($|£), is $1.90 = £1.00 and the spot bid exchange rate, Sb($|£), is $1.89 = £1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be "eaten" by the bid-ask spread?

Buying pounds t spot rate and reselling it thereafter gives a loss of $52631.58 ,which is the amount eaten by the bid-ask spread.

Explanation:

Eaten as used in the question is a technical word which implies the loss incurred by selling pounds at bid rate which earlier bought at the spot rate.

Spot rate $1.90=£ 1

Bid rate  $1.89=£ 1

By buying  £  using $10000000 I get :

$10000000/$1.9 = £5263157.89

By selling the pounds thereafter at bid rate gives:

£5263157.89 *$1.89=$9947368.42

In other words, there is a loss of $52631.58

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.