Farm Fresh Inc supplies sweet peas to canneries located throughout the Mississippi river Valley Like many grain and commodity markets, the market for sweet peas is perfectly competitive. With $250,000 in fixed costs, the company's total and marginal costs per ton (Q) are
TC=4250,000 = $200Q + $0.02Q2 (2 = Square because In do not have the option)
MC = (triangle)TC/TraiangleQ =$200+$0.04Q
A. Calculate the industry price necessary to induce short-run firm supply of 5,000, 10,000, and 15,000 tones of sweat peas. Assume that MC> AVC at every point along the firm's marginal cost curve and that total costs include a normal profit.
B. Calculate short-run firm supply at industry prices of $200, $500 and 1,000 per ton.
The answers are A Q=5,000, P=$400
Putting Q = 5,000; 10,000 and 15,000 in the MC curve we get:
MR = P = MC = 200 + ...
The solution answers the question below in great detail.