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2. Did you know that 80% of pumpkins grown in the US are grown within 90...

2. Did you know that 80% of pumpkins grown in the US are grown within 90 miles of Peoria? With many different pumpkin farmers in the area, the industry is nearly perfectly competitive.

Suppose a pumpkin farmer faces the following cost curves: MC = Q/50

AV C = Q/100 + 100/Q AT C = Q/100 + 400/Q AFC = 300/Q

(a) Suppose the market price of pumpkins is $5. How many pumpkins will they grow? What will their profits be?

(b) Now suppose demand for pumpkins significantly drops, driving price down to $1.6. What should the pumpkin farmer do?

(c) At what price and quantity do they make zero economic profits? (Note: you will have to take a square root to solve this)

(d) If all pumpkin farmers had the same cost curves, and the industry has constant costs, what would the long-run average supply curve be for the pumpkin industry?

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