Suppose, in a certain county, there are numerous wineries growing grapes in a perfectly competitive market....

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Suppose, in a certain county, there are numerous wineries growing grapes in a perfectly competitive market. The overall global market supply of grapes is given by Qs=2.5P. The demand function equals QD-300-1.5P. The marginal cost functions of three selected farms are given by MC1-60+Q, MC2=70+Q and MC3=80+Q. Assume there is no fixed cost of production. a) Calculate the overall market equilibrium quantity and the corresponding market clearing price. b) How much corn does each farm produce? c) What is each firm's annual profit? d) Assuming a discount rate of i=5% and a profit growth rate of g-0.5%, what is the land of each firm worth? e) Now assume, due to better climatic conditions, marginal cost for each firm falls by $10. Calculate the new marginal cost functions, quantities, profit and the new land values assuming the same discount and growth rates as under (d). What was the sum of the three land values before and after the change? Suppose, in a certain county, there are numerous wineries growing grapes in a perfectly competitive market. The overall global market supply of grapes is given by Qs=2.5P. The demand function equals QD-300-1.5P. The marginal cost functions of three selected farms are given by MC1-60+Q, MC2=70+Q and MC3=80+Q. Assume there is no fixed cost of production. a) Calculate the overall market equilibrium quantity and the corresponding market clearing price. b) How much corn does each farm produce? c) What is each firm's annual profit? d) Assuming a discount rate of i=5% and a profit growth rate of g-0.5%, what is the land of each firm worth? e) Now assume, due to better climatic conditions, marginal cost for each firm falls by $10. Calculate the new marginal cost functions, quantities, profit and the new land values assuming the same discount and growth rates as under (d). What was the sum of the three land values before and after the change?

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Part a To calculate the market equilibrium quantity and the corresponding market clearing price we need to find the point where the supply and demand curves intersect We can do this by setting the sup... View the full answer