The chart below depicts the current perfectly competitive market for wheat. The price is per
bushel (bu) and the quantities are in millions of bushels.
1. Using the table below, what is the equilibrium price of wheat in the market?
2. How much wheat will be produced at this price?
The chart below depicts the typical cost data for an individual wheat farmer that is operating in
the market depicted above.
1. What price will this individual farmer charge for a bushel of wheat?
2. What output level will this farmer produce to maximize his profits?
3. How much profit will the farmer earn?
Solution
Equilibrium in a market is obtained when the level of supply of a good meets the lvel of its
demand. That equilibrium represents the equilibrium price at which equiulibrium quantity will be
sell off by sellers and purchased by buyers.
1. Here in the given table, demand meets the supply level at 525 million bushels of wheat at the
price level of $6 per bushel. Hence, the equilibrium price level of whaet in this market is $6 per
bushel.
2. At equilibrium price that is at $6 per bushels, 525 million bushels are supplied and demnaded.
Therefore equilibrium quantity level is 525 million bushels. Hence, 525 million bushels will be
produce in the market.
3. The cost table of the farmer is completed as follows:
(1) As the market is perfectly competitive, a firm is price taker and the industry is price setter.
Therefore the farmer will chare $6 per bushel.
(2) To maximize profit a firm produces the level of quantity at which marginal revenue equals
marginal cost. Here marginal revenue meets marginal cost at $60. The corresponding level of
output is 50 bushels where total revenue is maximum. Thus the farmer will produce 50 bushels
to maximize profit.
(3) At the level of 50 bushels the farmer is earning profit equals $15.Quantity (A)Total Cost
(B)ATC (B/A)MC (TCn-1-TCn)Total Revenve (Price*quantity)Marginal Revenue (TRn-1-
TRn)Profit (TR-TC)0100-1010909106060-30201507.56012060-30301906.333333334018060-
10402255.625352406015502855.7603006015603656.083333338036060-
5704656.6428571410042060-45805857.312512048060-105.
The chart below depicts the current perfectly competitive market for.pdf
1. The chart below depicts the current perfectly competitive market for wheat. The price is per
bushel (bu) and the quantities are in millions of bushels.
1. Using the table below, what is the equilibrium price of wheat in the market?
2. How much wheat will be produced at this price?
The chart below depicts the typical cost data for an individual wheat farmer that is operating in
the market depicted above.
1. What price will this individual farmer charge for a bushel of wheat?
2. What output level will this farmer produce to maximize his profits?
3. How much profit will the farmer earn?
Solution
Equilibrium in a market is obtained when the level of supply of a good meets the lvel of its
demand. That equilibrium represents the equilibrium price at which equiulibrium quantity will be
sell off by sellers and purchased by buyers.
1. Here in the given table, demand meets the supply level at 525 million bushels of wheat at the
price level of $6 per bushel. Hence, the equilibrium price level of whaet in this market is $6 per
bushel.
2. At equilibrium price that is at $6 per bushels, 525 million bushels are supplied and demnaded.
Therefore equilibrium quantity level is 525 million bushels. Hence, 525 million bushels will be
produce in the market.
3. The cost table of the farmer is completed as follows:
(1) As the market is perfectly competitive, a firm is price taker and the industry is price setter.
Therefore the farmer will chare $6 per bushel.
(2) To maximize profit a firm produces the level of quantity at which marginal revenue equals
marginal cost. Here marginal revenue meets marginal cost at $60. The corresponding level of
output is 50 bushels where total revenue is maximum. Thus the farmer will produce 50 bushels
to maximize profit.
(3) At the level of 50 bushels the farmer is earning profit equals $15.Quantity (A)Total Cost
(B)ATC (B/A)MC (TCn-1-TCn)Total Revenve (Price*quantity)Marginal Revenue (TRn-1-
TRn)Profit (TR-TC)0100-1010909106060-30201507.56012060-30301906.333333334018060-
10402255.625352406015502855.7603006015603656.083333338036060-
5704656.6428571410042060-45805857.312512048060-105
