What is the profit of uncle joe in

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Reference no: EM133425868

Question: Suppose the market of grain is perfectly competitive. Uncle Joe is a typical farmer with a long run cost function of C = 120q - 30q2 + 5q3 .

a. Find the long run competitive equilibrium price of grain.

b. What is the profit of Uncle Joe in (a)? Explain whether he should stay in grain farming in the short run.

c. In reality, the fertility of farmlands is different. Some farmlands fit better in growing grain, while others fit better in growing vegetables. Owing to a rapid world economic growth in recent decades, many grain farmers have shifted towards growing vegetables, despite grain being the major diet in a lot of countries.

i. Given the additional information in (c), what is the shape of the long run market supply curve for grain? Explain. ii. Suppose there is a permanent reduction in the demand for grain. What would happen to the market price, market output level and the number of farmers in the grain market in the long run? Explain with a relevant diagram.

Reference no: EM133425868

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