Suppose honey is produced in a beehive using bees and sugar. Each honey producer uses one beehive which she rents for $1/month. Producing q gallons of honey requires spending q dollars on bees, and q2 dollars on sugar.
a) What is the total cost of producing q units of honey for an individual honey producer?
b) What is the average cost of producing q units of honey per month for an individual producer?
c) In general, if the total cost of producing honey is a + bq + cq2, then the marginal cost of producing honey is b + 2cq. Assuming each honey producer operates as a price-taker, what is the supply curve for an individual producer?
d) Let Q be the total market supply, and q is the supply of an individual firm. Therefore, q = Q/n where n is the total number of firms in the market. Determine an expression for the market supply curve.
e) Suppose the demand for honey is given by Q = 45-P. Also, suppose there are 20 honey producers in the market. What is the equilibrium price of honey?
f) How much profit does an individual producer make? Is this a long run equilibrium?