Farm Fresh, Inc., supplies sweet peas to canneries located throughout the Mississippi River Valley. Like many grain and commodity markets, the market for sweet peas is perfectly competitive. With $250,000 in fixed costs, the company's total and marginal costs per ton (Q) are:
TC = $250,000 + $200Q + $0.02Q2
MC = TC/Q = $200 + $0.04Q
A. Calculate the industry prices necessary to induce short-run quantities supplied by the firm of 5,000, 10,000, and 15,000 tons of sweet peas. Assume that MC > AVC at every point along the firm’s marginal cost curve and that total costs include a normal profit.
B. Calculate short-run quantities supplied by the firm at industry prices of $200, $500, and $1,000 per ton.