Question 1. It is estimated that the US has over 2 million farmers that are considered potato producers. In an effort to understand the potato market, data on prices and quantities (in millions) of 50 lb. potato bags were obtained and tabulated. The table across contains the results.
|
P
|
Qd
|
Qs
|
|
6
|
300
|
700
|
|
5
|
400
|
600
|
|
4
|
500
|
500
|
|
3
|
600
|
400
|
|
2
|
700
|
300
|
Two farmers were asked to volunteer information that would help evaluate their operating conditions. They provided the following information:
Farmer Smith
|
Q
|
TC
|
|
0
|
6500
|
|
1000
|
9000
|
|
2000
|
10000
|
|
3000
|
13000
|
|
4000
|
17000
|
|
5000
|
22000
|
Farmer Brown
|
Q
|
TC
|
|
7000
|
32400
|
|
8000
|
34400
|
|
9000
|
35400
|
|
10000
|
39400
|
|
11000
|
49400
|
|
12000
|
60400
|
(i) Determine the market structure of the potato industry.
(ii) Determine the profit maximizing or loss minimizing quantities and prices for each farmer.
(iii) Do you think that these farmers will survive or shut down in the short run? Show supporting computations and graphs. Farmer Brown’s TFC = $2,000.
Question 2. Complete the table below (showing equations used in calculations of missing values) then answer the questions that follow.
a. Determine the market structure and explain your reason.
b. Determine the optimum quantity this firm should produce and sell. Explain why this particular quantity and at what price.
c. Draw the graph showing the optimum quantity to produce and the price to sell that quantity at.