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Calculating industry price and quantity supplied

Farm fresh, Inc, supplies sweet peas to canneries located throughout the Mississippi River Valley. Like many gain 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 = $250,000 + $200Q + $0.02Q^2
MC= dTC/dQ = $200 + $0.040Q

A. Calculate the industry prices necessary to induce short-run quantities supplied by the firm of 5,000, 10,000, 15,000 tons of sweet 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 quantities supplied by the firm at industry prices of $200, $500 and $1,000 per ton.

Solution Preview

A. Calculate the industry prices necessary to induce short-run quantities supplied by the firm of 5,000, 10,000, 15,000 tons of sweet peas. Assume that MC>AVC at every point along the firm's marginal cost curve and that total costs include a normal profit.

In perfectly competitive market, a firm sets its output level ...

Solution Summary

Solution describes the steps to calculate the necessary industry price at which given quantity can be supplied by a perfectly competitive firm. It also calculates the quantities supplied by perfectly competitive firm at given set of prices.

$2.19