In the food processing sector of a country, 100 identical small firms produce frozen fruits. Each producer is a price-taker in the market and faces the following cost conditions:
|
Total Cost in €
|
15
|
18
|
20
|
21
|
23
|
26
|
30
|
35
|
41
|
48
|
56
|
|
Firm production (q) in tons
|
0
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
The aggregate market demand for the frozen fruits has been estimated as follows:
|
Price in €
|
10
|
9
|
8
|
7
|
6
|
5
|
4
|
3
|
2
|
1
|
0
|
|
Total production (Q) in tons
|
0
|
100
|
200
|
300
|
400
|
500
|
600
|
700
|
800
|
900
|
1000
|
Using these data answer the following:
(1) Determine the supply curve of each individual small producer, taking into account that the producer has the option to cease production if this is not profitable.
(2) Determine the aggregate supply curve of the sector.
(3) Find the short-run equilibrium price and total quantity (Q) in the sector. Does each individual producer make positive or negative profits in this equilibrium?
(4) Find the long-run equilibrium in the sector, i.e., price, total quantity and number of firms when there is free entry and exit in the market. [Hint: the number of firms can be a non-integer number.]