Suppose the wheat market in Brazil is a perfectly competitive industry, where a representa- tive firm in this market has the long run total cost function TC(q) = 100+ q². The demand curve for wheat in Brazil is given by Q## = 600 – 10P. Finally, assume for now that, due to high tariffs, there are no imports of wheat into Brazil or exports of wheat out of Brazil. a) Derive a representative firm's marginal cost and average total cost functions. b) In the long-run equilibrium, how much wheat does a single firm produce? c) Derive the long run equilibrium price and quantity of the Brazilian wheat market.

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Chapter1: Making Economics Decisions
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part A,B,C

Question 3.
Suppose the wheat market in Brazil is a perfectly competitive industry, where a representa-
tive firm in this market has the long run total cost function TC(q) = 100+q². The demand
curve for wheat in Brazil is given by Q5# = 600 – 10P. Finally, assume for now that, due
to high tariffs, there are no imports of wheat into Brazil or exports of wheat out of Brazil.
a) Derive a representative firm's marginal cost and average total cost functions.
b) In the long-run equilibrium, how much wheat does a single firm produce?
c) Derive the long run equilibrium price and quantity of the Brazilian wheat market.
Russia is one of the largest wheat producing countries. The long run supply curve for
wheat in Russia is given by QU = 35P – 560, while the demand for wheat is given by
QRU = 250 – 10P.
d) Suppose there are no imports of wheat into Russia or exports of wheat out of Russia.
Calculate the equilibrium price and quantity in the Russian wheat market.
Now assume that the demand and supply in these two countries are given as above and that
a new trade agreement is signed by them. According to the agreement, it costs t to ship a
unit of wheat between the countries.
e) If t = 0 (i.e., it costs zero to ship a unit of wheat between the countries), what are the
equilibrium prices for wheat in Brazil and Russia? Also, how many units are either
imported into Brazil or exported out of Brazil? (Hint: You may find sketching the
aggregate demand and supply on a single diagram useful.)
f) Same question as in e), but now assume it costs t
1
per unit to ship between the
countries.
Transcribed Image Text:Question 3. Suppose the wheat market in Brazil is a perfectly competitive industry, where a representa- tive firm in this market has the long run total cost function TC(q) = 100+q². The demand curve for wheat in Brazil is given by Q5# = 600 – 10P. Finally, assume for now that, due to high tariffs, there are no imports of wheat into Brazil or exports of wheat out of Brazil. a) Derive a representative firm's marginal cost and average total cost functions. b) In the long-run equilibrium, how much wheat does a single firm produce? c) Derive the long run equilibrium price and quantity of the Brazilian wheat market. Russia is one of the largest wheat producing countries. The long run supply curve for wheat in Russia is given by QU = 35P – 560, while the demand for wheat is given by QRU = 250 – 10P. d) Suppose there are no imports of wheat into Russia or exports of wheat out of Russia. Calculate the equilibrium price and quantity in the Russian wheat market. Now assume that the demand and supply in these two countries are given as above and that a new trade agreement is signed by them. According to the agreement, it costs t to ship a unit of wheat between the countries. e) If t = 0 (i.e., it costs zero to ship a unit of wheat between the countries), what are the equilibrium prices for wheat in Brazil and Russia? Also, how many units are either imported into Brazil or exported out of Brazil? (Hint: You may find sketching the aggregate demand and supply on a single diagram useful.) f) Same question as in e), but now assume it costs t 1 per unit to ship between the countries.
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