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Unformatted text preview: lts of your analysis. Include correctly labeled diagrams, if useful or required, in explaining
your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional
changes. Use a pen with black or dark blue ink.
1. Assume that corn is produced in a perfectly competitive market. Farmer Roy is a typical producer of corn.
(a) Assume that Farmer Roy is making zero economic profit in the short run. Draw a correctly labeled side-byside graph for the corn market and for Farmer Roy and show each of the following.
(i) The equilibrium price and quantity for the corn market, labeled as PM1 and QM1, respectively
(ii) The equilibrium quantity for Farmer Roy, labeled as QF1
(b) For Farmer Roy’s corn, is the demand perfectly elastic, perfectly inelastic, relatively elastic, relatively
inelastic, or unit elastic? Explain.
(c) Corn can be used as an input in the production of ethanol. The demand for ethanol has significantly
(i) Show on your graph in part (a) the effect of the increase in demand for ethanol on the market price and
quantity of corn in the short run, labeling the new equilibrium price and quantity as PM...
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This note was uploaded on 02/03/2014 for the course ECONOMIC 112 taught by Professor Van le during the Fall '12 term at American Internation College.
- Fall '12
- van le