A farmer can sell as many bushels of apples as she wants at a Price of $6, but if she increases price at all, her quantity sold drops to zero.
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Get it written →A farmer can sell as many bushels of apples as she wants at a Price of $6, but if she increases price at all, her quantity sold drops to zero.
1. How do you know the farmer is in a Perfectly Competitive market?
2. Draw a graph of the marginal revenue curve for the farmer.
3. Suppose the farmer is currently making positive profits.
a. Is the farmer in the short-run or long-run?
b. Will firms enter or exit this market?
Part II- Now suppose that the farmer is making a loss. The MR=MC at a price of $6, and the quantity produced at this point is 10. Fixed costs are $25, and the average variable cost for 10 units is $4.50.
4. What is the amount of the loss? (show calculations)
5. Should the farmer operate in the short-run? Explain.
6. Should the farmer operate in the long-run? Explain.
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