Question
Assume that there are many producers selling walnuts. The walnuts are sold as homogenous 20kg sacks to supermarkets. The cost structure of a typical firm
Assume that there are many producers selling walnuts. The walnuts are sold as homogenous 20kg sacks to supermarkets.
The cost structure of a typical firm producing sacks of walnuts is presented below.
a) Complete the table below (4 marks)
Based on your completed table, suppose that the current price of a sack of walnuts is $300. Answer the following:
b) Is it advisable for a new firm to enter the market? Why or why not? (2 marks)
c) What will be the long-run competitive equilibrium price for a sack of walnuts? (2 marks) (Hint: think about the long-run diagram for the typical firm in perfect competition.)
d) Could a firm in the industry earn a profit at this long-run price? Demonstrate why with numbers from the table. (2 marks)
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