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Calculating industry price and quantity supplied

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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.

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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.

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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 provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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