14.5 Wheat is produced under perfectly competitive conditions. Individual wheat farmers have U-shaped, long-run average cost curves that reach a minimum average cost of $3 per bushel when 1,000 bushels are produced.

a. If the market demand curve for wheat is given by Q D
2,600,000  200,000P, where QD is the number of bushels demanded per year and P is the price per bushel, in long-run equilibrium what will be the price of wheat, how much total wheat will be demanded, and how many wheat farms will there be?

b. Suppose demand shifts outward to Q D
3,200,000  200,000P.

If farmers cannot adjust their output in the short run, what will market price be with this new demand curve? What will the profits of the typical farm be?

c. Given the new demand curve described in part (b), what will be the new long-run equilibrium? (That is, calculate market price, quantity of wheat produced, and the new equilibrium number of farms in this new situation.)

d. Graph your results.