The image consists of two graphs labeled as Figure 9.2.**Graph a: The Industry**- **Axes**: The vertical axis represents the price per bushel in dollars, and the horizontal axis represents the quantity of bushels of wheat.- **Lines**: - **Supply (S)**: An upward sloping line indicating the relationship between the price and the quantity supplied. - **Demand (D1 and D2)**: Two downward sloping lines, D1 and D2, representing different levels of demand.- **Equilibrium Points**: - The intersection of the supply (S) and demand (D1) curves indicates an equilibrium price of $5. - The intersection of the supply (S) and demand (D2) curves shows a new equilibrium price of $7, after a rightward shift in demand.**Graph b: A Representative Firm**- **Axes**: The vertical axis represents the cost, and the horizontal axis represents the quantity of bushels of wheat.- **Curves**: - **Marginal Cost (MC)**: U-shaped curve that initially decreases, then increases. - **Average Total Cost (ATC)**: U-shaped curve that lies above the AVC curve. - **Average Variable Cost (AVC)**: U-shaped curve below the ATC curve.- **Equilibrium and Costs**: - At a price of $5, the quantity produced is 10 bushels, aligning with the MC curve. - At a price of $7, the quantity produced increases to 12 bushels. - At a price of $9, the quantity produced further rises to 13 bushels.These diagrams illustrate the market adjustments in supply and demand and how they affect prices and outputs both at the industry level and for an individual firm. ### Analysis of Market Conditions and Firm Behavior in Wheat Production#### Figure 9.2 ExplanationThis diagram is divided into two parts:1. **The Industry (Panel a)** - The graph shows the demand and supply for the wheat industry. - The vertical axis represents the price per bushel in dollars, and the horizontal axis represents the bushels of wheat. - The supply curve $S$ slopes upwards, indicating a positive relationship between price and quantity supplied. - Three demand curves ($D_1$, $D_2$, and $D_3$) show different levels of demand. - Each demand curve corresponds to different market conditions: - $D_1$ is the lowest demand. - $D_2$ is the intermediate demand. - $D_3$ is the highest demand.2. **A Representative Firm (Panel b)** - This graph illustrates cost curves for an individual firm producing wheat. - Marginal Cost (MC), Average Total Cost (ATC), and Average Variable Cost (AVC) are shown. - The intersection of MC and ATC is typically where firms maximize profits. - The firm produces where MC = Price.#### Problem Statement**Refer to Figure 9.2:** If demand for wheat is $D_2$, then a profit-maximizing firm will produce _____ units and earn a profit of _____.Options:- a. 13; $91- b. 7; $0- c. 15; $30- d. 13; $0In this scenario, analyze the graphs to determine where MC equates to the market price corresponding to the demand $D_2$ to find optimal production quantity and profit.

With Demand at D2, the price is 7 $, and the profit maximizing firm will produce where Price = MC ie…

Answered: Refer to Figure 9.2. If demand for…

Refer to Figure 9.2. If demand for wheat is D2, then a profit-maximizing firm will produce units and earn a profit of O a. 13; $91 O b. 7; $0 O c. 15; $30 O d. 13; $0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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