Firm l has $670,000 to invest and is considering two alternatives. investment a would pay 6 percent ($40,200 annual before-tax cash flow). investment b would pay 4.8 percent ($32,160 annual before-tax cash flow). the return on investment a is taxable, while the return on investment b is tax exempt. firm l forecasts that its 21 percent marginal tax rate will be stable for the foreseeable future. a. compute the explicit tax and implicit tax that firm l will pay with respect to investment a and investment b. b-1. what is the annual after-tax cash flow for investment a

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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.