a. Using a correctly labeled graph for Fresh Farm, show each of the following in the short run. i. The marginal cost curve and average total cost, labeled MC and ATC, respectively ii. Fresh Farm's price and loss-minimizing quantity, labeled PF and QF, respectively iii. The average variable cost curve, labeled AVC
a. Using a correctly labeled graph for Fresh Farm, show each of the following in the short run. i. The marginal cost curve and average total cost, labeled MC and ATC, respectively ii. Fresh Farm's price and loss-minimizing quantity, labeled PF and QF, respectively iii. The average variable cost curve, labeled AVC
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Assume soybeans are produced by a perfectly competitive,
constant-cost industry. Fresh Farm is a typical firm producing
soybeans and is currently operating with an economic loss.
a. Using a correctly labeled graph for Fresh Farm, show
each of the following in the short run.
i. The marginal cost curve and average total cost,
labeled MC and ATC, respectively
ii. Fresh Farm's price and loss-minimizing quantity,
labeled PF and QF, respectively
iii. The average variable cost curve, labeled AVC
b. Suppose that newspapers have recently reported that
excessive soybean consumption can cause health
problems. As a result, will the new loss-minimizing
quantity for Fresh Farm be greater than, less than, or
equal to QF in the short run? Explain.
c. Is the long-run market supply for soybeans perfectly
inelastic, relatively inelastic, unit elastic, relatively
elastic, or perfectly elastic?
d. Assume now that the soybean market is in a long-run
equilibrium and that fertilizers used in soybean
production cause water pollution. Using a correctly
labeled graph for the soybean market, show each of the
following.
I. Market equilibrium quantity and price, labeled
QM and PM
II. Marginal social cost curve, labeled MSC
III. Socially optimal quantity, labeled Qs
IV. The area representing deadweight loss, shaded
completely
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