Potato farming (like farming of most agricultural products) is highly competitive (i. e. very close to a perfectly competitive market). thus, price is determined by demand and supply. the us demand for potatoes is estimated to be qd = 184 − 20p where p is the farmer’s wholesale price (per 100 pounds) and qd is consumption of potatoes per person (in pounds). the industry supply is qs = 124 + 4p
a. find the competitive market price and output.
b. potato farmers in montana raise about 7 percent of total output. if these farmers enjoy bumper crops (10 percent greater harvests than normal), is this likely to have much effect on price on montana farmers’ incomes?
c. suppose that, due to favorable weather conditions, u. s. potato farmers as a whole have bumper crops. the total amount delivered to market is 10 percent higher than that calculated in part (a). find the new market price. what has happened to total farm revenue? is industry demand elastic or inelastic? in what sense do natural year-to-year changes in growing conditions make farming a boom-or-bust industry?

The new york times (nov. 30, 1993) reported that “the inability of opec to agree last week to cut production has sent the oil market into turmoil . . [leading to] the lowest price for domestic crude oil since june 1990.” why were the members of opec trying to agree to cut production? so they could save more oil for future consumption so they could lower the price so they could raise the price why do you suppose opec was unable to agree on cutting production? because each country has a different production capacity because each country experiences different production costs because each country has an incentive to cheat on any agreement the newspaper also noted opec’s view “that producing nations outside the organization, like norway and britain, should do their share and cut production.” what does the phrase “do their share” suggest about opec’s desired relationship with norway and britain? opec would like norway and britain to keep their production levels high. opec would like norway and britain to act competitively. opec would like norway and britain to join the cartel.