How will affect the quantity of output in the long run

Reference no: EM13204325

Quantity Produced Total Cost
0 $15
1 $21
2 $33
3 $50
4 $72
5 $95
6 $120

1. Miguel is a farmer who produces oats. The oat market is a pure competition market. Miguel is now making choices in the short run. The going rate for oats is currently $24 per unit. The total cost function is as the table above shows. What is the profit-maximizing level of output? Explain your answer.

2. Miguel is now looking at the long run so that he can plan for the future.
a) Should Miguel expect a change in the number of firms in the industry, given the information from question 1? Explain your answer.
b) More time passes, such that the oat industry is in long run equilibrium with a constant cost industry. The government imposes a $1.50 tax per unit of oats. How will this affect the quantity of output in the long run for Miguel?

Reference no: EM13204325

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