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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

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

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter11: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 14CQ
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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
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
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. The table below shows the short-run production function for Michelle's Accounting Company. Number of Total Product per Bookkeepers Hour 1 8 2 20 40 4 55 65 6 70 7 65 8 55 (a) After which bookkeeper do diminishing marginal returns begin for Michelle's Accounting Company? Explain using numbers. (b) Assume Michelle's Accounting Company sells its accounting services in a perfectly competitive market at a price of $20. Calculate the marginal revenue product of the sixth bookkeeper. Show your work. (c) Michelle's Accounting Company hires bookkeepers in a perfectly competitive labor market for bookkeepers at a wage rate of $110 per hour, and the market price of services remains $20. How many bookkeepers will Michelle's Accounting Company hire to maximize its profit? Explain using marginal analysis. (d) Assume bookkeepers and accounting software are substitutes in providing accounting services by all accounting firms in the market. If accounting software, a fixed input, becomes less expensive and Michelle's Accounting Company provides the same quantity of accounting services, will each of the following increase, decrease, or stay the same? (i) The wage rate Michelle's Accounting Company will pay its bookkeepers. Explain. (ii) The demand curve for bookkeepers for Michelle's Accounting Company. Explain.
Transcribed Image Text:Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. The table below shows the short-run production function for Michelle's Accounting Company. Number of Total Product per Bookkeepers Hour 1 8 2 20 40 4 55 65 6 70 7 65 8 55 (a) After which bookkeeper do diminishing marginal returns begin for Michelle's Accounting Company? Explain using numbers. (b) Assume Michelle's Accounting Company sells its accounting services in a perfectly competitive market at a price of $20. Calculate the marginal revenue product of the sixth bookkeeper. Show your work. (c) Michelle's Accounting Company hires bookkeepers in a perfectly competitive labor market for bookkeepers at a wage rate of $110 per hour, and the market price of services remains $20. How many bookkeepers will Michelle's Accounting Company hire to maximize its profit? Explain using marginal analysis. (d) Assume bookkeepers and accounting software are substitutes in providing accounting services by all accounting firms in the market. If accounting software, a fixed input, becomes less expensive and Michelle's Accounting Company provides the same quantity of accounting services, will each of the following increase, decrease, or stay the same? (i) The wage rate Michelle's Accounting Company will pay its bookkeepers. Explain. (ii) The demand curve for bookkeepers for Michelle's Accounting Company. Explain.
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