Imagine now that new seed technologies lead to a fall in the average and marginal costs of producing wheat. Trace in words and pictures the adjustment of the industry and its firms to a new long-run equilibrium. In the examples of trade we have heretofore dealt with, the country does not specialize completely in the production of one good or the other. Here is a case in which it will. In what follows, let s graph Econia's economy with apples on the horizontal axis and bananas on the vertical axis.
Truffles grow underground on or near the roots of trees.
Pigs love them and truffles are often harvested by sending pigs into the woods to find them. Imagine a village at the edge of a forest. Each inhabitant can take a pig into the forest to find truffles. Neile has finally managed to corner the market for quality soccer balls and now has a monopoly. A zealous regulator steps in and demands that Neile set a price which will vastly reduce the profits she receives from selling her soccer balls.