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Assignment on Managerial Economics Doc

   

Added on  2020-02-24

2 Pages467 Words98 Views
Managerial EconomicsQuestion 3 a)It is apparent that the given corn market is a perfectly competitive market where there arenumber of small sellers who are essentially price takers. Also, the number of buyers is alsolarge. The requisite graph for normal profits is indicated below (Mankiw, 2014).It is apparent from the graph on the left which highlights the corn industry dynamicswhere based on the industry demand and industry supply the equilibrium price Pe has beendecided. The individual farmers would have to sell their corn at the same price. Since theprice charged is higher than the ATC at the point of intersection of MR=MC, hence thereis an economic profit made which is the shaded area. The above represents the case ofprofit maximisation in case of a perfectly competitive market (Nicholson & Snyder, 2011).(b) Based on the efforts of the government and also the research report, there would be anincrease in the demand for corn but the short term supply would remain constant. As aresult , the market price would increase in the short term and hence the farmers would earnhigher profits. The requisite diagram for the same is indicated below (Mankiw, 2014).

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