Answer to Question #152223 in Microeconomics for Syed Muhammed Ali

Question

Suppose a dairy farmer produces and supplies milk in a perfectly competitive market and faces the situation in the short run illustrated by the Figure 2.a given below. Figure 2.b shows the market demand and supply of milk. Using the figure 2, answer the following questions: 

 

a.      Identify the profit maximizing level of output (q*) and the price. 

b.     At profit-maximizing level of quantity, is the firm earning loss or profit? How do you know? (without explanation your answer will not be accepted).  

Answer 1

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