4. Consider the perfectly competitive market for California oranges.
B. (2 points) The market supply curve for oranges is depicted by: P = 100 + QS
The market demand curve for oranges is depicted by: P = 400 – 4QD
What is the equilibrium price and quantity of oranges in this market?
C. (2 points) Draw a graph of the orange market in equilibrium using the information depicted in part B complete with demand and supply intercepts. Identify the areas that represent consumer surplus and producer surplus. Calculate the consumer surplus, the producer surplus, and the total welfare.
5. Continue to consider the market for oranges in problem 4. You now learn that each firm in the orange market faces the same:
total cost curve, TC = q2 + 100q + 600
marginal cost curve, MC = 2q + 100
average total cost curve, ATC = q + 100 + 600/q
A. (1 points) What is the profit maximizing level of output for each firm?
B. (2 points) What is the level of profit for each firm at the profit maximizing level of
output?
C. (2 points) Is this market in a long-run equilibrium? If so, explain why. If not, how
will the market change in the long-run?
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