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The wheat 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 attached; the long-run cost curves of a wheat farmer are shown in the right-hand panel. Currently, the market price for wheat is $2 per pound, and at that price, consumers are purchasing 800,000 pounds of wheat per day.   Using the graphs attached, answer the following:   a. How many pounds of wheat 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 wheat be? Briefly explain your answer

The wheat 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 attached; the long-run cost curves of a wheat farmer are shown in the right-hand panel. Currently, the market price for wheat is $2 per pound, and at that price, consumers are purchasing 800,000 pounds of wheat per day.   Using the graphs attached, answer the following:   a. How many pounds of wheat 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 wheat be? Briefly explain your answer

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
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The wheat 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 attached; the long-run cost curves of a wheat farmer are shown in the right-hand panel. Currently, the market price for wheat is $2 per pound, and at that price, consumers are purchasing 800,000 pounds of wheat per day.

 

Using the graphs attached, answer the following:

 

a. How many pounds of wheat 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 wheat be? Briefly explain your answer.

LMC LATC Price & cost ($) S $2- Price ($) 1.50 1 3,400 3,000 0.50 2,300 2,000 2,400 $2 1,700 1.50- 1,000 1 Quantity (pounds) 0.50- 2,000 1,600 1,200 800 Quantity (thousands of pounds)
Transcribed Image Text:LMC LATC Price & cost ($) S $2- Price ($) 1.50 1 3,400 3,000 0.50 2,300 2,000 2,400 $2 1,700 1.50- 1,000 1 Quantity (pounds) 0.50- 2,000 1,600 1,200 800 Quantity (thousands of pounds)
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