Homework Answers
a) in order to maximize the profits, Ali should produce at point where Marginal Revenue is equal to Marginal Cost.
here price is not changing, so Ali should produce at price = MC
When P =MC = $84.70 per bushel, Ali will produce 4500 bushels in order to maximize his profits in short run.
b) Profits = Total Revenue - Total Costs
Total Revenue = Quanity sold*Price
=4500* 84.7 = $381,150
Total Costs = ATC*Quatity Sold
= 49.14*4500 = $221,130
Profits = 381150 - 221130 = $160,020
c) When Price is $22.7 per bushel, Ali will Choose 1500 bushels to produce. Reasoning behind this is similar to first question.
d) Profits = Total Revenue - Total Costs
Total Revenue = Quanity sold*Price
=1500* 22.7 = $34,050
Total Costs = ATC*Quatity Sold
= 28.03*1500 = $42,045
Profits = 34050 - 42045 = - $7,995
e) if the market price is $14.7 per bushel, then Ali will choose to produce 1000 bushels. Reasoning is similar to part a)
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2) farmer fixed costs are___. how could you find these?
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The graph below shows shows a perfectly competitive market for wheat and a typical farm in the market. The demand for wheat increases from D1 to D2. Assume that wheat production is a constant-cost industry. A typical farm The market for wheat Cost ($) Price (S per bushel) MC 10 10 9 ATC 8 7.20 715 751 D2 5 5 40 80 120 160 200 240 Quantity (thousands of bushels) 20 40 60 80 100 120 Quantity (milions of bushels)...
1)for this farmer to maximize profits, he should
produce___bushels of wheat. explain
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3) if this farmer maximizing profit, his profit will be__.
explain
4) this farmer would earn a zero economicc profit price was___
explain
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