Assume the market for fertilizer is perfectly competitive and is in equilibrium.
1-Draw a graph for the Supply and Demand for fertilizer as well as a graph for the individual firm.
2-A change in the weather causes an increase in demand for fertilizer. Draw the new demand curve and show how this affects the firm’s marginal revenue and profit-maximizing quantity.
3-How does this affect the profit if the firms in the market?
4-Since there is free entry and exits how will firms respond to this change in the market? Illustrate how their response will affect the supply curve in the market.
5-After firms respond to the change, what is the profit earned by firms in the perfectly competitive market?