Wheat is produced under perfectly competitive conditions. Individual wheat farmers have u-shaped, long-run average cost curves that reach a minimum at $3 per unit when 1,000bushels are produced.
(a)The market demand for wheat is given by Qd=2600, 000-200,000P, where Qd is the number of bushels demanded per year and P is the price per bushel.
(b)Suppose demand increases to Qd= 3200,000- 200,000P
1.IF farmers cannot adjust their output in the short run(suppose the short run marginal cost curve is vertical), what will market price be with this new demand?
2.Calculate how much profit the typical firm will make
3.Given the new demand in part b, calculate the new long run equilibrium price and quantity.
4. How many farms will be growing wheat at this new equilibrium?
(a)The market demand for wheat is given by Qd=2600, 000-200,000P, where Qd is the number of bushels demanded per year and P is the price per bushel.
(b)Suppose demand increases to Qd= 3200,000- 200,000P
1.IF farmers cannot adjust their output in the short run(suppose the short run marginal cost curve is vertical), what will market price be with this new demand?
2.Calculate how much profit the typical firm will make
3.Given the new demand in part b, calculate the new long run equilibrium price and quantity.
4. How many farms will be growing wheat at this new equilibrium?