(a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b)
(a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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(a) Let the industry producing soybeans be in a long-run equilibrium. What is the
(b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes
Q = 15.3 − p.
In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel?
(c) Calculate the change in the
(d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b).
Transcribed Image Text:A perfectly competitive industry that pro-
duces soybeans consists of many farmers that can produce 45 bushels
per acre at a minimal average cost $9 per bushel. The average size of
a soybean field is 5,000 acres. Each producer of soybeans must also
pay shipping fees for its output, and the shipping fee $s per bushel.
Assume that
s =0.8Q,
where Q is the total industry output in units of billions of bushels
of soybeans. The demand for soybeans (also measured in billions of
bushels) is given by
Q = 15.75 – P,
where p is the price of one bushel of soybeans.
(a) Let the industry producing soybeans be in a long-run equilibrium.
What is the equilibrium price of a bushel of soybeans? How many
billions of bushels are produced? How many farmers are there in
the industry? What is the shipping fee per bushel of soybeans?
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