a. Using the information in the graphs, find the representative fam\'s profit ma

Question

a. Using the information in the graphs, find the representative fam's profit maximizing output and economic profit. Instructions: In the graph for the representative farm, draw the farm' price (demand) line, indicate the profit maximizing or optimal output level, and the average total cost (ATC) at this output level using the respective tools. Perfectly competitive corn market A representative farm MC Opmmal a 8.6 8.0 7.0 65 ATC ATC 4.0 25 20 1.5 0.6 0 100 200 300 400 500 EC0 700 B00 900 10Co 55 5 167 7379 Quantity (millions of bushelslyear) Quantity (1,000 of bushelslyear) This farm's will earn an economic profit of $ at its profit maximizing output level b. Considering the answer to part a, you can expect existing farms to leave the market

Explanation / Answer

A) price=MR=4 and MC=4 at Q=67 thosuand bushels and ATC=5

Thus economic loss of a farm will be 67000

B)some existing firm will exit the market

C)In long run supply decreases and supply curve will shift leftward and intersect the demand curve at $5. Each firm will produce Q=68.5 thousand=6.85million and the market price will be $5 and representative firm earns 0 economic profit in long run

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