The international demand and supply functions in the corn industry are: P = 5 -

Question

The international demand and supply functions in the corn industry are:

P = 5 - 0.0000006Q, and P = 2 + 0.0000004Q.

P is the price per bushel and Q the number of bushels in millions.

At what price can a wheat farmer sell her corn?
What will be the total industry output of corn?

Suppose there are 1,000 small farms in this industry. What will be the output per farm?
How much revenue will each farm earn?

If in fact the revenues are sufficiently high to yield handsome profits, how might competition change the happy situation?

Explanation / Answer

5-.0000006*Q=2+.0000004*Q Q=3000000 P=3.20 3000 3000*3.2=9600 more competitors will come in if their is profit to be had and this will drive down the price until it is not profitable.

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