Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Market demand is Q = 600,000 – 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?
What will be an ideal response?
The firm's supply is q = 0.5p; market supply is Q = 500p. Market equilibrium can be found as 500p = 600,000 – 100p, or 600p = 600,000, so p = 1,000 and Q = 500,000. q = 0.5p = 500.
Profit = (500 ∗ 1,000 ) - (10 + 250,000 ) = 249,990. Each firm earns a profit.
Economics
You might also like to view...
In the figure above, suppose the original budget line is BD. A rise in the price of a compact disc will
A) rotate the budget line to AD. B) rotate the budget line to CD. C) not move the budget line. D) result in a parallel leftward shift of the budget line.
Economics
On the eve of the Civil War, what was the number one export in the U.S.?
(a) Cotton (b) Wheat (c) Gold (d) Shipping services
Economics