1Assume that the market for apples is perfectly competitive. All farmers have identical production costs. The market demand for apples is P = 1000 - Q*1/12500,(where Q is the quantity in tons and P is the price in dollars per ton. The market supply curve is P = -49.35 + Q/7700: All famers are identical. For instance, the total cost for any farmer is equal to TC = 15,000,000 +0.004 Q2 + 200 x Q.

aDetermine total expenditures or market revenues as function of quantity. compute the quantity level that maximize total market expenditures.

b) Explain whether demand is elastic, unit elastic or inelastic at the quantity in part a?

c) Compute the equilibrium quantity and price in the apple market

d) Draw the demand curve that one apple procedure faces

e) Compute the level at which an apple farmer must produce to maximize his profit given the market equilibrium. Determine the total revenue ,cost and profit at this equilibrium.

f) Is the market for apples really competitive? explain your answer by computing a measure of concentration.

g)Is the apple market under conditions determined in part e at a long term equilibrium? explain

2

The figure below shows the cost curves of a profit-maximizing perfectly competitive firm. MR MC ..... AC /. ATC AVC MC Revenue and cost (dollars per unit) .! .. AC . - N W O 10 20 30 40 50 Output (units per day) area? (his a. Show the firm's marginal revenue curve on the graph if the price equals $7