Question
The market for organic tomato is competitive. Table 1 below presents the price and demand schedule for tomato in the market. Table 1. Price and
The market for organic tomato is competitive. Table 1 below presents the price and demand schedule for tomato in the market.
Table 1. Price and demand for organic tomatoes
Price of organic tomato (per kg) | Quantity demanded |
$6 | 2000 |
$8 | 1600 |
$10 | 1000 |
$12 | 700 |
$14 | 420 |
$16 | 100 |
$18 | 0 |
Each organic tomato farmer in the market has a cost schedule which is shown in Table 2 below.
Table 2. Quantity of tomatoes and marginal cost
Quantity of organic tomatoes | Marginal cost |
0 | 0 |
20 | 6 |
30 | 13 |
40 | 10 |
50 | 16 |
60 | 18 |
Assume the fixed cost is $200.
Assume that the price of organic tomatoes is $10 per kg. How many organic tomatoes should each farmer sell? How many farmers are there? How much profit does each farmer gain?
Fill in the blanks below.
1. Each farmer should sell ………… organic tomatoes.
2. There are…………. farmers in the market. (Hint: Round down. If your calculator shows 5.5, type 5)
3. The profit for each farmer is $ ……………. (Hint: Make sure put a negative sign or "-" if it is a loss.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
1 Each farmer should sell organic tomatoes Given that the price of organic tomatoes is 10 per kg farmers will sell where their marginal cost MC equals ...Get Instant Access with AI-Powered Solutions
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Step: 2
Step: 3
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