In the US cotton market, there are 500 identical competitive farms, each farm having the cost function C(q) = 162 +10q + 0.5q² where q is the quantity of cotton in tons produced by each farm. The market demand curve is given by Qd = 10,400 – 50p. (a) Calculate the market equilibrium price p*. (b) Suppose the government gives each farm a subsidy of $8 per ton. Calculate the long- run market price. (c) How many farmers will there be in the cotton market in the long run?

In the US cotton market, there are 500 identical competitive farms, each farm having the cost function C(q) = 162 +10q + 0.5q² where q is the quantity of cotton in tons produced by each farm. The market demand curve is given by Qd = 10,400 – 50p. (a) Calculate the market equilibrium price p*. (b) Suppose the government gives each farm a subsidy of $8 per ton. Calculate the long- run market price. (c) How many farmers will there be in the cotton market in the long run?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In the US cotton market, there are 500 identical competitive farms, each farm having the
cost function C(q) = 162 + 10q + 0.5q² where q is the quantity of cotton in tons produced
by each farm. The market demand curve is given by Qd = 10,400 – 50p.
-
(a) Calculate the market equilibrium price p*.
(b) Suppose the government gives each farm a subsidy of $8 per ton. Calculate the long-
run market price.
(c) How many farmers will there be in the cotton market in the long run?

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