Question

Draw two graphs side-by-side that show the market equilibrium price for soy beans as $3 per...

Draw two graphs side-by-side that show the market equilibrium price for soy beans as $3 per pound. The second graph is for Sally the soy bean farmer whose profit maximizing output is 80 pounds of soybeans. Show on your graph Sally making a profit of $140 at the market price of $3. Label all curves you draw and clearly indicate the profit region.

 Is the above scenario a short-run or long-run equilibrium?

 If it is not a long-run equilibrium, tell me how you know this?

 What do you expect to happen in the long-run?

 What effect will these long run changes have on either the supply or demand curve in the U.S. Soy bean market?

 What effect will these long run soy bean market changes have on Sally the soy bean farmer?

 What happens in the long run to soy bean prices?

What happens in the long run to the quantity of soy beans produced in the market?

 What happens in the long run to the quantity of soy beans produced by Sally?

Homework Answers

Answer #1

The scenario is of short run equilibrium because we consider cost as fixed cost and in short run fixed cost exist. In long run profit start to decline.

In the long run, a firm is free to adjust all of its inputs. New firms can enter any market; existing firms can leave their markets. We shall see in this section that the model of perfect competition predicts that, at a long-run equilibrium, production takes place at the lowest possible cost per unit and that all economic profits and losses are eliminated

So Price may decline and quantity remain the same letting normal profit also decline.

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