Y5

2. (25 points) Perfect Competition with two types of firms: In western Kansas, corn can be grown in two ways with or without irrigation. Dryland farmers, who do not irrigate their corn, have long-run total costs of LTC = Q3 -20Q2 + 105Q, where Q is measured in thousands of bushels. Farmers lucky enough to have water rights or river access have lower costs: Their long-run total cost is LTC, = Q3 -1602 + 67Q. (a) If the corn market is in long-run equilibrium, with both dryland and irrigated corn being grown, what must the price of corn be?(b) How much economic rent will farmers with access to irrigation earn? (c) Explain why irrigating farmers earn economic rents, but will still earn zero economic profits