Only a limited amount of high-quality wine-growing land is available. The firms that farm the land are identical. Because the demand curve hits the market supply curve in its upward sloping section, the firms initially earn positive profit.
a. The owners of the land raise their rents so as to capture the profit. Show how the market supply curve changes (if at all).
b. Suppose some firms own the land and some rent. Do these firms behave differently in terms of their shutdown decision or in any other way?