Assume the market for fertilizer is perfectly competitive and is in equilibrium.
Draw a graph for the Supply and Demand for fertilizer as well as a graph for the individual firm.
A change in the weather causes an increase in demand for fertilizer. Draw the new demand curve and show how this affects the firm’s marginal revenue and profit-maximizing quantity.
How does this affect the profit if the firms in the market?
Since there is free entry and exit, how will firms respond to this change in the market? Illustrate how their response will affect the supply curve in the market.
After firms respond to the change, what is the profit earned by firms in the perfectly competitive market?