What is the equation for the demand (which is also MR) faced by the individual farmer?
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.
The individual competitive farm must accept the market-determined price of organic corn as given. This is the equilibrium or market-clearing price found where QD = QS for the entire market, as shown below.
QD = QS
Substituting: 340 – 2P = 100 + 4P
Solving: 6P = 240, or P = $40 per bushel.
Since the competitive firm has no control over price, it faces a horizontal demand curve at the $40 price, so the equation for demand (and MR) it faces is simply P = MR = $40.
You might also like to view...
The Glass-Steagall Act prevented commercial banks from
A) opening branches in other states unless the bank is part of a bank holding company. B) getting into investment banking. C) selling shares in themselves in the open market. D) issuing commercial paper.
Roxanne and Eileen live in an apartment building with a laundry room in the basement. Roxanne does her laundry at home, spending $4 and 5 hours per week. Eileen sends her laundry out, spending $20 and 15 minutes per week transporting the laundry. On the basis of the information given, which one of the following must be true?
a. Roxanne earns more labor income than Eileen. b. Eileen earns more total income than Roxanne. c. Roxanne enjoys doing laundry; Eileen does not. d. Eileen has less laundry than Roxanne. e. Eileen and Roxanne attach different utilities to time spent doing laundry.
An unanticipated shift to a more restrictive monetary policy by the Fed will
a. increase real interest rates and, thereby, reduce investment, current consumption, and aggregate demand. b. reduce real interest rates, leading to a depreciation of the dollar and an expansion in net exports and aggregate demand. c. increase real interest rates, leading to higher asset prices that will stimulate aggregate demand. d. reduce real interest rates and, thereby, stimulate investment, current consumption, and aggregate demand.
Studies comparing growth rates of countries practicing Import-Substituting Industrialization (ISI) with growth rates of countries using policies that emphasize expansion of exports have found
A. higher growth rates in those countries practicing ISI. B. little difference in growth rates between the two groups of countries. C. higher growth rates in those countries using policies that emphasize export expansion. D. no evidence that either type of policy has been successful.