Suppose honey is produced in a beehive using bees and sugar. Each honey producer

Question

Suppose honey is produced in a beehive using bees and sugar. Each honey producer uses one beehive which she rents for $30 per month. Producing q gallons of honey in one month requires spending 5q dollar bees and 2q^2 dollars on sugar. Let Q be the total market supply and q is the supply of an individual firm. Therefore, q=Q/n where n is the total number of firms in the market. Suppose the demand for honey is given by Q=500-4p. Also, suppose there are 80 honey producers in the market. What is the equilibrium price of honey?

Explanation / Answer

$30 a month rent 5q dollar on bees and 2q^2dollars on sugar for q gallons honey total cost of producing honey in a month for an individual honey producer = ($30 + 5q$ + 2q^2$) for profit,the given data is not sufficient no,it is not a long run equilibrium as it also depends on the demand which keeps varying with the price of the commodity apart from other factors.

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