At an output level of 8 thousand bushels, explain in terms of both marginal profit and total profit why the individual farmer should expand production.
In the competitive market for organic corn, market demand is QD = 340 – 2P and market supply is QS= 100 + 4P, where P is the price per bushel, and Q is market output in thousands of bushels. Each individual farmer faces a marginal cost function of MC = 10 + 3q, where q is the single farmer’s output level in thousands.
At an output level of 8 thousand bushels, the farm’s MR = $40, but its MC = 10 + 3(8) = $34. At this point, the farmer’s marginal profit (M?), which equals MR – MC, is $6, which means that if the farm produces the 8000th bushel of organic corn, its total profit would rise by $6.
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A) a given percentage of marginal cost to marginal cost of production. B) a given percentage of fixed cost to total fixed cost. C) a given percentage of average variable cost to average total cost. D) a given percentage of average total cost to average total cost.
The two words most often used by economists are
a. prices and quantities. b. resources and allocation. c. supply and demand. d. efficiency and equity.
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A. is restricted, as it can only use fiscal policy to achieve its economic goals. B. must follow policy directives from the IMF. C. is restricted, as it can only use monetary policy to achieve its economic goals. D. is no longer restricted.