26. Many of the people living with incomes below the global poverty line (around $500/person) arefarmers. Max decides that he wants to help peanut farmers in a competitive market earn larger profitsfrom their crops and invent a new method that helps conserve fertilizer and lower costs. (Someeconomists actually did some research like that.) This problem is about the short run and long runconsequences.Suppose that before Max introduces the new method each farm has these costs. The farms are allassumed to be identical for simplicity.MC(q) = 2q + 12ATC(q)9+ 12 + qFixed cost = $9The units are all in kgs or $/kg.%3DWhat is an individual farm's supply curve?a. q(P) = 0.5P – 2b. q (P) %3D — 0.5Р + 2с. q (Р) 3D 0.5Р — 6d. q (P) %3D — 0.5Р +6 27. (continued) There are four farms so what is the short run market supply curve? Combine that marketsupply with this estimated market demand, Q(P) = 60 – P, to find the market price. Determine howmuch each firm produces and what each firm makes in profit.N = $%3D28. (continued) Now you introduce the new method which reduces the variable costs. As a result the MCand ATC are lower:MCС(q) %3D 2q + 69.=-+6+qATC(q)Repeat the steps above to find the new short run equilibrium.How much profit does each firm now make? (this should be higher)29. (continued) What will happen in the long run as farmers are allowed to enter or exit? Check theboxes below for the variables that will decrease in the long run compared to the short run equilibriumyou found in the previous question.[] N, the number of firms[] P, the market price[] q, the quantity each firm produces[] T, the profit of an individual firm[] ATC, the average total cost of each firm

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26. Many of the people living with incomes below the global poverty line (around $500/person) are farmers. Max decides that he wants to help peanut farmers in a competitive market earn larger profit from their crops and invent a new method that helps conserve fertilizer and lower costs. (Some economists actually did some research like that.) This problem is about the short run and long run consequences. Suppose that before Max introduces the new method each farm has these costs. The farms are all assumed to be identical for simplicity. MC(q) = 2q + 12 9. ATC(q) =-+ 12 + q Fixed cost = $9 The units are all in kgs or $/kg. What is an individual farm's supply curve? а. q (P) 3D 0.5Р — 2 b. q(P) = –0.5P + 2 c. q(P) = 0.5P – 6 d. q(P) 3D —0.5Р + 6 %3D =

26. Many of the people living with incomes below the global poverty line (around $500/person) are farmers. Max decides that he wants to help peanut farmers in a competitive market earn larger profit from their crops and invent a new method that helps conserve fertilizer and lower costs. (Some economists actually did some research like that.) This problem is about the short run and long run consequences. Suppose that before Max introduces the new method each farm has these costs. The farms are all assumed to be identical for simplicity. MC(q) = 2q + 12 9. ATC(q) =-+ 12 + q Fixed cost = $9 The units are all in kgs or $/kg. What is an individual farm's supply curve? а. q (P) 3D 0.5Р — 2 b. q(P) = –0.5P + 2 c. q(P) = 0.5P – 6 d. q(P) 3D —0.5Р + 6 %3D =

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter8: Costs And The Supply Of Goods

Section: Chapter Questions

Problem 19CQ

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