Question
Suppose a farmer is a price taker (i.e. perfectly competitive) for soybean sales with a cost function given by TC = 0.1q2 + 2q +
Suppose a farmer is a price taker (i.e. perfectly competitive) for soybean
sales with a cost function given by
TC = 0.1q2 + 2q + 100
a. (15pt) Find the marginal cost function.
b. (15pt) What is this firms supply function?
Hint: Supply function expresses q (quantity) as a function of P (price).
c. (10pt) What is the profit maximizing level of output in the long-run?
d. (10pt) What is the long-run profit for this firm?
e. (5pt) Suppose the farmer has to purchase a license for $50 per period in order to stay in
business. In this case, what is its new total cost function?
f. (5pt) Suppose the farmer has to purchase a license for $50 per period in order to stay in
business. In this case, what is its marginal cost function?
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