Q1. This would be reasonable for a usual purely competitive wheat farmer to lower his price per bushel in order to sell more. The higher sales level will cause the average fixed cost to reduce and this will outcome in more profit for the individual farmer. True or false and explain why?
Q2. In other conditions it would be reasonable for a purely competitive wheat farmer to increase his price per bushel as he could decrease his variable costs by selling less at a higher price. State true or false and explain why?
Q3. Assume that the price support system for cotton needs the federal government to pay farmers $3,000 per acre to not plant cotton. How would you shift either the supply or demand curve for the cotton to describe the effect of this action? In your answer explain just one shift, not two.