producer surplus
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I am having trouble finding the cost function since it is needed to calculate profit( revenue my cost). Also can you help with the others, please.
The short-run supply curve for an orange producer in Florida is P=.001Q, where Q is bushels of oranges produced in a year. The market price of a bushel of oranges is $20 per bushel.
a. What is the profit maximizing bushels of oranges this producer supplies each year?
b. What is the producer surplus (net-operating profit) at this optimized output level?
c. Suppose the farmer faced a land rental cost of $150,000 per year, and miscellaneous other fixed costs of $50,00 per year. What would be the producers total profits at the production point established in b?
d. Suppose there is a biotechnology breakthrough that allows oranges to be grown in colder weather, changing the farmers supply curve to: P=.00075Q. What is the optimized output level now?
e. What is the producer surplus with the new supply curve?
f. What is the level of total profit with the new supply curve, at the optimized output level determined in (d), and with fixed costs as before (totaling $200,000)?
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Solution Summary
The producer surplus is assessed. Profit maximizing and producer surpluses are determined.
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The short-run supply curve for an orange producer in Florida is P=.001Q, where Q is bushels of oranges produced in a year. The market price of a bushel of oranges is $20 per bushel.
a. What is the profit maximizing bushels of oranges this producer supplies each year?
In this case, the Price mentioned (short term supply curve) P =.001Q is the 'price' of producing Q units for the farmer. It is not the selling price of the market. Selling Price of the market is $20
Thus, the cost to the farmer is .001Q
Now profit per brushel = 20 - ...
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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