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The coffee industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative coffee farmer are shown in the right-hand Currently, the market price for coffee is $2 per pound, and at that price consumers are purchasing 800,000 pounds of coffee per day. Using the graphs shown in the images find: a. How many pounds of coffee will each farmer produce if they want to maximize profits? b. How many farmers are currently serving the industry (fractional numbers are fine)? c. In the long run, what will the equilibrium price of coffee be? Briefly explain your answer.

The coffee industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative coffee farmer are shown in the right-hand Currently, the market price for coffee is $2 per pound, and at that price consumers are purchasing 800,000 pounds of coffee per day. Using the graphs shown in the images find: a. How many pounds of coffee will each farmer produce if they want to maximize profits? b. How many farmers are currently serving the industry (fractional numbers are fine)? c. In the long run, what will the equilibrium price of coffee be? Briefly explain your answer.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 11PA: Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2...
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The coffee industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative coffee farmer are shown in the right-hand Currently, the market price for coffee is $2 per pound, and at that price consumers are purchasing 800,000 pounds of coffee per day.

Using the graphs shown in the images find:
a. How many pounds of coffee will each farmer produce if they want to maximize profits?
b. How many farmers are currently serving the industry (fractional numbers are fine)?
c. In the long run, what will the equilibrium price of coffee be? Briefly explain your answer.

2. The coffee industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative coffee farmer are shown in the right-hand panel. Currently, the market price for coffee is $2 per pound, and at that price consumers are purchasing 800,000 pounds of coffee per day. Price & LMC LATC S cost ($) Price ($) $2- 1.50 1 $2 0.50 3,400 3,000 1.50 2,400 2,300 2,000 1 1,700 D 1,000 0.50 2,000 Quantity (pounds) 1,600 1,200 800 a. How many pounds of coffee will each farmer produce if they want to maximize profits? Quantity (thousands of pounds) b. How many farmers are currently serving the industry (fractional numbers are fine)? Using the graphs above, answer the following: c. In the long run, what will the equilibrium price of coffee be? Briefly explain your answer.
Transcribed Image Text:2. The coffee industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative coffee farmer are shown in the right-hand panel. Currently, the market price for coffee is $2 per pound, and at that price consumers are purchasing 800,000 pounds of coffee per day. Price & LMC LATC S cost ($) Price ($) $2- 1.50 1 $2 0.50 3,400 3,000 1.50 2,400 2,300 2,000 1 1,700 D 1,000 0.50 2,000 Quantity (pounds) 1,600 1,200 800 a. How many pounds of coffee will each farmer produce if they want to maximize profits? Quantity (thousands of pounds) b. How many farmers are currently serving the industry (fractional numbers are fine)? Using the graphs above, answer the following: c. In the long run, what will the equilibrium price of coffee be? Briefly explain your answer.
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An industry comprised of many firms producing an identical product ia a perfect competitive industry. A firm under perfect competition is a price taker and can sell any quantity of commodity at the market determined price. 

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