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    Pricing and Output Decisions: Supply and Demand

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    The Chilean Fruit Growers Association estimates the following market supply and demand curves for fruit:

    QS = 125,000P

    QD = 200,000 - 50,000P

    Where Q is the daily output in pounds and P is the price per pound.

    a) Determine the price and quantity that would result under competitive conditions.
    b) The Chilean Fruit Growers are trying to organize a cartel among growers in their region. Assuming that all growers participate in the cartel, what price and quantity should the cartel set?
    c) The Growers Association would like to give growers and idea of the benefits available from the cartel. How significant are the advantages from the cartel?

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    https://brainmass.com/economics/pricing-output-decisions/pricing-output-decisions-supply-demand-575983

    Solution Preview

    a) Determine the price and quantity that would result under competitive conditions.

    QS=125000P
    QD=200000-50000P

    Put QS=QD for equilibrium
    125000P=200000-50000P
    175000P=200000
    P=200000/175000=$1.14285714

    QS=125000*1.14285714=142857.14
    QD=200000-50000*1.14285714=142857.14

    Equilibrium price=$1.14
    Equilibrium quantity=142857 pound

    b) The Chilean Fruit Growers are trying to organize a cartel among growers in their region. Assuming that all growers participate in the cartel, what price and quantity ...

    Solution Summary

    Solution depicts the steps to determine equilibrium price and quantity in the given case.

    $2.19