Problem: Farm fresh, Inc, supplies sweet peas to canneries located throughout the Mississippi River Valley. Like many gain 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 + $0.02Q^2
MC= dTC/dQ = $200 + $0.040Q
Question 1: Calculate the industry prices necessary to induce short-run quantities supplied by the firm of 5,000, 10,000, 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.
Question 2: Calculate short-run quantities supplied by the firm at industry prices of $200, $500 and $1,000 per ton.