In the US cotton market, there are 500 identical competitive farms, each farm having the cost function C(q) = 162 +10q + 0.5q² where q is the quantity of cotton in tons produced by each farm. The market demand curve is given by Qd = 10,400 – 50p. (a) Calculate the market equilibrium price p*. (b) Suppose the government gives each farm a subsidy of $8 per ton. Calculate the long- run market price. (c) How many farmers will there be in the cotton market in the long run?

In the US cotton market, there are 500 identical competitive farms, each farm having the cost function C(q) = 162 +10q + 0.5q² where q is the quantity of cotton in tons produced by each farm. The market demand curve is given by Qd = 10,400 – 50p. (a) Calculate the market equilibrium price p*. (b) Suppose the government gives each farm a subsidy of $8 per ton. Calculate the long- run market price. (c) How many farmers will there be in the cotton market in the long run?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section5.7: Application 7: Why Do Colleges Use Gpa,s Actss, And Sats, For Purposes Of Admission?

Problem 2ST

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