Suppose that at the beginning of a year, the price of corn is $3.80 per bushel and 14 billion bushels are harvested. There are approximately 400,000 corn farmers, so the average output per farmer is about 350,000 bushels. The following graphs assume that the market for corn is initially in long-run equilibrium. Favorable weather during the year increases the total corn harvest to 16 billion bushels. Assume that no other factors affect the market for corn.

a. What percentage of the total corn output did the average corn farmer produce at the beginning of the year?
b. Show on the graph for the total market for corn and the graph for the typical farm any changes that occur in the short run as a result of the increase in the corn harvest. Be sure to note whether any curves shift and whether there are any changes in the equilibrium price or the equilibrium quantities.
c. Show on the graph for the total market for corn and the graph for the typical farm any changes that occur in the long run as a result of the increase in the corn harvest. Be sure to note whether any curves shift and whether there are any changes in the equilibrium price or the equilibrium quantities.

Transcribed Image Text:

Price (dollars Price and cost (dollars per bushel) per MC bushel) ATC $3.80 $3.80 350 Quantity (thousands of bushels) Quantity (millions of bushels) 14.2