Consider the accompanying graph, which depicts the cost curves of a perfectly competitive seller of potatoes. Potatoes currently sell for $3 per pound. a. To maximize profit, the potato grower should produce pounds of potatoes. Price & cost ($/poud) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 1 MC 2 3 4 5 6 7 Quantity of potatos (in thousands) ATC AVC P 8 9 10 b. Suppose that the potato grower's bank ratchets up the interest rate applicable to the grower's adjustable-rate mortgage loan. This increases the size of the potato grower's

Consider the accompanying graph, which depicts the cost curves of a perfectly competitive seller of potatoes. Potatoes currently sell for $3 per pound. a. To maximize profit, the potato grower should produce pounds of potatoes. Price & cost ($/poud) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 1 MC 2 3 4 5 6 7 Quantity of potatos (in thousands) ATC AVC P 8 9 10 b. Suppose that the potato grower's bank ratchets up the interest rate applicable to the grower's adjustable-rate mortgage loan. This increases the size of the potato grower's

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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Consider the accompanying graph, which depicts the cost
curves of a perfectly competitive seller of potatoes. Potatoes
currently sell for $3 per pound.
a. To maximize profit, the potato grower should produce
pounds of potatoes.
Price & cost ($/poud)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
0
1
MC
2
3 4
5
6
Quantity of potatos (in thousands)
7
ATC
AVC
8
9
P
10
b. Suppose that the potato grower's bank ratchets up the
interest rate applicable to the grower's adjustable-rate
mortgage loan. This increases the size of the potato grower's
monthly mortgage payment. Illustrate the change in the
mortgage payment by shifting the appropriate cost curve or
curves.

c. With the change in interest rates, the grower will produce
The potato
grower's profit will
interest rates.
the change in
d. The potato grower's supply curve will
rates.
the change in interest

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