Explore BrainMass

Market exchange with production

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Market Exchange With Production

The table below shows the quantities of product X that a producer can produce in one growing season on a 1 acre farm using different amounts of labor. The dollar values assume that the land rents for $100 and labor's wage is $300 per growing season.

Land Labor Total Output Marginal Product Total Variable Cost Total Cost Marginal Cost Average Variable Cost Average Total Cost
1 0 0 0 100
1 1 6 6 300 400 50.00 50.00 66.67
1 2 13 7 600 700 42.86 46.15 53.85
1 3 21 8 900 1000 37.50 42.86 47.62
1 4 30 9 1200 1300 33.33 40.00 43.33
1 5 38 8 1500 1600 37.50 39.47 42.11
1 6 45 7 1800 1900 42.86 40.00 42.22
1 7 51 6 2100 2200 50.00 41.18 43.14
1 8 56 5 2400 2500 60.00 42.86 44.64
1 9 60 4 2700 2800 75.00 45.00 46.67
1 10 63 3 3000 3100 100.00 47.62 49.21
1 11 65 2 3300 3400 150.00 50.77 52.31

This next table is a marginal value table for one individual for product X. MV is measured in dollars. Use these two tables to answer the last question.

Quantity of X per growing season Marginal Value
1 150
2 137
3 100
4 92
5 84
6 75
7 60
8 50
9 43
10 37

Suppose that there is a market for X that consists of 10 identical producers, each with the same production costs as shown in the table above. In this market there are also 100 consumers, each with the marginal value as shown in the mv table above. Assume that all transaction costs are zero and traders will trade when indifferent:
a. What will be the equilibrium price for product X?
b. How many units of X will each producer produce?
c. How much profit will each producer earn?
d. How many workers will each producer employ?
e. If the government thought that the price you determined in 5a was "unfair" and passed a law saying the price could not be greater than $43,
would there be a shortage or a surplus in this market?

© BrainMass Inc. brainmass.com October 25, 2018, 8:09 am ad1c9bdddf

Solution Preview

Let us start with the consumer. A consumer will purchase X only if MV > P. Let's say we are looking for the position at which MV = P.

Quantity of X per growing season Marginal Value
1 150
2 137
3 100
4 92
5 84
6 75
7 60
8 50
9 43
10 37

You can calculate the demand in the following manner. If, using the table above, the price is less than each unit MV for each person, you can assume that they will buy it. So, if the price is ...

Solution Summary

The market exchanges with productions are examined. The total variable costs are provided.

See Also This Related BrainMass Solution

Mychorrhizal Fungi

Cooperation and trade are common in the natural world. Based on the cost of production and the constraints presented by the environment, an organism may be more successful by trading for a product than producing it. In this situation the organism may specialize in one product and trade for another. In this assignment we will examine an example of trading partners, mycorrhizal fungi and plants, and compare it to the principles of international trade, an important component of macroeconomics. After you view this tutorial, consider some of the principles it introduced and how they apply to specialization and trade between the symbiotic partners that make up a mycorrhizal association.

Scientists believe that this symbiosis may have been key to plants' success on land. Begin your introduction to this symbiosis at the Compost Gardener, and be sure to view their video. Next, proceed to this site maintained by the University of Western Australia, School of Plant Biology: http://mycorrhizas.info/vam.html to complete your research and locate important images for your assignment.
Using the resources provided above, develop a PowerPoint presentation that includes the following:

Slides 1-3
Compose a brief overview of the structure and function of plant roots. Include definitions and images of these terms: epidermis, exodermis, cortex, endodermis, and root hairs. You can refer to the following resource:
Roots: http://mycorrhizas.info/root.html

Slides 4-10
Provide an explanation of the symbiosis between mycorrhizal fungi and plant roots. Include definitions and explanation of the differences between Arbuscular mycorrhiza and Ectomycorrhizal fungi using the following images:
Mycorrhizal fungi pdf 1
Mycorrhizal fungi pdf 2
Ectomycorrhizal fungi pdf EMF 1
And the websites: http://mycorrhizas.info/vam.html

Slides 11-15
Discussion of the costs and benefits associated with this trade arrangement using the following resources:
Terms of Trade.ppt
Walder, F., Niemann, H., Natarajan, M., Lehmann, M. F., Boller, T. & Wiemken, A. Mycorrhizal Networks: Common Goods of Plants Shared under Unequal Terms of Trade. Plant Physiology. 2012. 159:789-797. Accessed on August 8, 2014, at http://www.plantphysiol.org/content/159/2/789.full

Slide 16
Now view information by Green Economy (youtube) about a company that markets this symbiosis. Read more about mycorrhizae and Mycorrhizal Applications, Inc. at their website http://mycorrhizae.com/.
•How can the trade between these organisms benefit our economy and land use?

Slide 17—References

View Full Posting Details