Five hundred small almond growers operate in areas with plentiful rainfall. The marginal cost of producing almonds in these locations is given by MC = .02Q, where Q is the number of crates produced in a growing season. Three hundred almond growers operate in drier areas where costly irrigation is required. The marginal cost of growing almonds in these locations is given by MC = .04Q.
a. Find the individual supply curve for each type of almond grower. (Remember that the supply relationship expresses the quantity brought to market at various prices. Remember also that for a competitive firm, P = MR.)
b. "Add up" the individual supply curves to derive the market supply curve.
c. If the market demand for almonds is Q d = 105,000 - 2,500P, what will the equilibrium price of almonds be? The equilibrium quantity?
d. How many almonds will each type of almond grower produce at that price?
e. Verify that the total production of all almond growers equals the equilibrium quantity you found in part (c).