You Are Given the Following Market Data for Apples

question 188

Essay

You are given the following market data for apples.
Demand is represented by: P = 12 - 0.01Q
Supply is represented by: P = 0.02Q
where P= price per bushel, and Q=quantity.
a.Calculate the equilibrium price and quantity.
b.Suppose the government guaranteed producers a price of $10 per bushel.What would be the effect on quantity supplied? Provide a numerical value.
c.By how much would the $10 price change the quantity of apples demanded? Provide a numerical value.
d.Would there be a shortage or surplus of apples?
e.What is the size of this shortage or surplus? Provide a numerical value.

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Definitions:

Perfectly Competitive Firm

A company that operates in a market where there are many sellers and buyers, the product is homogeneous, and there is free entry and exit from the market.

MR (Marginal Revenue)

The surplus income obtained by selling an extra unit of a product or service.

MC (Marginal Cost)

The additional cost incurred by producing one more unit of a good or service, critical in determining the optimal level of production.

AVC (Average Variable Cost)

The cost of labor, materials, and other variable expenses divided by the quantity of output produced, excluding fixed costs.