Can you provide an answer using excel. And, provide a, b and c.
Consider potato farming in the US, a highly competitive market. Assume the market is perfectly competitive, and that the market demand for potatoes is given by =− and market supply is given by =+.
a. Find the competitive equilibrium price and quantity of potatoes in this market.
b. Assume that one particular farmer, Joe, knows that his cost function is given by: cc()=10+2+0.12 This implies that Joe’s marginal costs are given by the equation: ()=2+0.2. Find Joe’s profit-maximizing level of output, and calculate the profits he makes.
c. What if the price falls to $3? Now how much would Joe want to produce to maximize profits? What are his profits now? Should Joe shut down operations or continue to produce?