26. Many of the people living with incomes below the global poverty line (around $500/person) are farmers. Max decides that he wants to help peanut farmers in a competitive market earn larger profits from their crops and invent a new method that helps conserve fertilizer and lower costs. (Some economists actually did some research like that.) This problem is about the short run and long run consequences.Suppose that before Max introduces the new method each farm has these costs. The farms are all assumed to be identical for simplicity.\[ MC(q) = 2q + 12 \]\[ ATC(q) = \frac{9}{q} + 12 + q \]Fixed cost = $9The units are all in kgs or $/kg.What is an individual farm’s supply curve?a. $ q(P) = 0.5P - 2 $b. $ q(P) = -0.5P + 2 $c. $ q(P) = 0.5P - 6 $d. $ q(P) = -0.5P + 6 $ **Transcription for Educational Website:**---**27. (continued)**There are four farms so what is the short-run market supply curve? Combine that market supply with this estimated market demand, $ Q(P) = 60 - P $, to find the market price. Determine how much each firm produces and what each firm makes in profit.\[\pi = \$____\]**28. (continued)**Now you introduce the new method which reduces the variable costs. As a result, the MC and ATC are lower:\[MC(q) = 2q + 6\]\[ATC(q) = \frac{9}{q} + 6 + q\]Repeat the steps above to find the new short-run equilibrium.How much profit does each firm now make? (this should be higher)**29. (continued)**What will happen in the long run as farmers are allowed to enter or exit? Check the boxes below for the variables that will decrease in the long run compared to the short-run equilibrium you found in the previous question.- [] $ N $, the number of firms- [] $ P $, the market price- [] $ q $, the quantity each firm produces- [] $ \pi $, the profit of an individual firm- [] ATC, the average total cost of each firm--- **Explanation:**This text discusses concepts of short-run and long-run equilibria in the context of four farms in a market. It provides equations for marginal cost (MC) and average total cost (ATC) with variable reductions and discusses potential outcomes when firms can enter or exit the market. The objective is to understand market dynamics and determine changes in profits, costs, and production quantities.

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26. Many of the people living with incomes below the global poverty line (around $500/person) are farmers. Max decides that he wants to help peanut farmers in a competitive market earn larger profit from their crops and invent a new method that helps conserve fertilizer and lower costs. (Some economists actually did some research like that.) This problem is about the short run and long run consequences. Suppose that before Max introduces the new method each farm has these costs. The farms are all assumed to be identical for simplicity. MC(q) = 2q + 12 9. ATC(q) =-+ 12 + q Fixed cost = $9 The units are all in kgs or $/kg. What is an individual farm's supply curve? а. q (P) 3D 0.5Р — 2 b. q(P) = –0.5P + 2 c. q(P) = 0.5P – 6 d. q(P) 3D —0.5Р + 6 %3D =

26. Many of the people living with incomes below the global poverty line (around $500/person) are farmers. Max decides that he wants to help peanut farmers in a competitive market earn larger profit from their crops and invent a new method that helps conserve fertilizer and lower costs. (Some economists actually did some research like that.) This problem is about the short run and long run consequences. Suppose that before Max introduces the new method each farm has these costs. The farms are all assumed to be identical for simplicity. MC(q) = 2q + 12 9. ATC(q) =-+ 12 + q Fixed cost = $9 The units are all in kgs or $/kg. What is an individual farm's supply curve? а. q (P) 3D 0.5Р — 2 b. q(P) = –0.5P + 2 c. q(P) = 0.5P – 6 d. q(P) 3D —0.5Р + 6 %3D =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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