The April 30, 2022 issue of The Economist had an article titled "Can Brazil help with food shortages around the world?". You do not have to read the story to understand the setup of these questions. Please, carefully read each question to understand when these changes are introduced into the initial scenario. Here is what you should focus on to complete analysis.

• For this analysis, assume the wheat market is perfectly competitive, demand is downward-sloping, supply is upward-sloping, and production technology results in traditional U-shaped ATC and AVC.
• Finally, for all questions, assume market price is always greater than the minimum of the AVC.

You will be using the same graph in all questions that require a graph (Questions 6, 8, and 10), with each question asking you to add new elements to the graph as part of your analysis.

Question 6

Assume that prior to the outbreak of the war in Ukraine, the wheat market was in Long Run Equilibrium (LRE).

• Using our side-by-side graph methodology (with market on the left and individual firm on the right), graphically depict the market equilibrium P₀ and Q₀, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q₀), and the individual firm's profit ₀, if any (shaded and clearly labeled).
• Reminder: Be sure to label all relevant points and axes.

Question 7

Please refer to your graph in Question 6. Provide a brief narrative explaining the conditions that must be satisfied, including the profitability of an individual firm, in a perfectly competitive industry's LRE. Explain what the firm's economic profit is in this state and how it is achieved.

Question 8

Now analyze the impact of the war in Ukraine on the market for wheat. The war has dramatically decreased wheat production in Ukraine, one of the major producers of wheat prior to the war. Assume the war significantly reduces the supply of wheat and that there are no changes to the demand for wheat.

• On the same graph you produced in Question 6, graphically depict any changes affecting the market for wheat and any changes that impact the individual firm.
• Show the movements of the curves (if any) and the new Short Run Equilibrium (SRE).
• Indicate the new market equilibrium P₁ and Q₁, the optimal output of an individual firm representative of the other firms in the industry at this SRE (labeled as q₁), and the individual firm's profit ₁, if any (shaded and clearly labeled).
• Reminder: be sure to label all relevant points and axes.

Question 9

Please refer to your graph in Question 8. Provide a brief narrative explaining the movements and the resulting change in an individual firm's profit, if any. Please make sure you address the changes in the market equilibrium quantity Q, market price P, and the individual firm's profit-maximizing quantity q, if any.

Question 10

Assume the wheat market continues to experience the short-run supply disruption that you modeled in Question 8. However, farmers in the U.S. have been making planning decisions in the past few weeks and many are diverting land to wheat production away from corn and soybeans. The Economist article indicated that Brazilian farmers will make similar planting decisions, switching from corn and soybeans to wheat when they make their new season plans in September. Analyze the impact of this switch on the market for wheat.

• On the same graph you produced in Questions 6 and 8, graphically depict any changes affecting the market for wheat caused by the decision of many U.S. farmers to grow more wheat.
• Assume that after these North and South American farmers ramp up their wheat production, the market will move to a new Long Run Equilibrium (LRE).
• Indicate the new market equilibrium P₂ and Q₂, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q₂), and the individual firm's profit ₂, if any (shaded and clearly labeled).
• Reminder: be sure to label all relevant points and axes.

question 11

Please refer to your graph in Question 10. Provide a brief narrative explaining the movements and the resulting change in an individual firm's profit, if any. Please make sure you address the changes in the market equilibrium quantity Q, market price P, and the individual firm's profit maximizing quantity q, if any.