Suppose that a firm in a perfectly competitive and constant cost industry is initially in long run equilibrium at point a on the following isoquant. if the market demand curve for the firm's product suddenly and permanently shifted to the right, discuss what will happen to the firm's capital/labor ratio over time, i. e., in the short run and in the long run. (draw diagrams to support your reasoning and be explicit about your assumptions.

Financial markets and channel to . they also channel money from individuals who want to for the future to those who need cash to spend today. a third function of financial markets is to allow individuals and businesses to adjust their risk. for example, , such as the vanguard index fund, and , such as spdr's or “spiders,” allow individuals to spread their risk across a large number of stocks. financial markets provide other mechanisms for sharing risks. for example, a wheat farmer and a baker may use the to reduce their exposure to wheat prices. financial markets and intermediaries allow investors to turn an investment into cash when needed. for example, the of public companies are because they are traded in huge volumes on the . are the main providers of payment services by offering checking accounts and electronic transfers. finally, financial markets provide information. for example, the of a company that is contemplating an issue of debt can look at the yields on existing to gauge how much interest the company will need to pay.