4q + 200, where q is the farm”s output. At the present, the government planners are setting a price of P = 20 per bushel for wheat. A) How much wheat…
4q + 200, where q is the farm”s output. At the present, the government planners are setting a price of P = 20 per bushel for wheat. A) How much wheat will each farm produce? At the long-run perfectly competitive equilibrium for the wheat-growing segment of the farming industry, will the price be lower or higher than the present administered price? (Hint: remember the long-run conditions?? B) If each wheat farm had ten acres before privatization and produced a yield of four bushels per acre, should the size of these farms be increased or decreased after the market becomes competitive? In other words, will it be cheaper to grow wheat on larger or smaller farms when the market is competitive?
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