Suppose that the USDA expects that 53.3 billion bushels of soybeans will be produced this year...

Suppose that the USDA expects that 53.3 billion bushels of soybeans will be produced this year at a price of $8.50/bushel. Assume that the elasticity of supply is 0.3 and that the elasticity of demand is -0.2 (both very inelastic).

1. Derive the linear supply and demand curves for this equilibrium.

2. What quota is required to increase the soybean price to $9.25/bushel? And what is the economic cost of this solution (i.e., what is the change in producer surplus and change in consumer surplus, and what is the sum of these changes)?

Expert Solution

Rahul Sunny answered 1 year ago

Suppose that the USDA expects that 53.3 billion bushels of soybeans will be produced this year...

Suppose that the USDA expects that 53.3 billion bushels of soybeans will be produced this year at a price of $8.50/bushel. Assume that the elasticity of supply is 0.3 and that the elasticity of demand is -0.2 (both very inelastic). 2. What quota is required to increase the soybean price to $9.25/bushel? And what is the economic cost of this solution (i.e., what is the change in producer surplus and change in consumer surplus, and what is the sum of...

Suppose a farmer anticipates to harvest 500,000 bushels of soybeans. Contract size is 5,000 bushels. The...

Suppose a farmer anticipates to harvest 500,000 bushels of soybeans. Contract size is 5,000 bushels. The initial margin and maintenance margin for soybean futures are $1,980 and $1,800 per contract, respectively. Currently, the farmer has $200,000 cash in his brokerage account, and the price of March 2021 soybeans futures contract is $10.00/bushel. A.) describe how the farmer would hedge his harvest. Clearly state the number of soybeans futures contracts the farmer should buy OR sell. b.) how much money would...

Suppose Brenda's farm, which operates in a perfectly competitive market for soybeans, produces 32,000 bushels of...

Suppose Brenda's farm, which operates in a perfectly competitive market for soybeans, produces 32,000 bushels of soybeans and sells them at the going market price of $4.50 per bushel. The farm's marginal cost of the last bushel sold is $4.40. What would you advise Brenda to do to increase her profit? Question 22 options: Lower the price so that she could sell more... Increase production and continue to charge the same price... Raise the price without changing production ... Raise...

In March, a soybean farmer is planning to plant 100,000 bushels of soybeans, which will be...

In March, a soybean farmer is planning to plant 100,000 bushels of soybeans, which will be ready for harvesting and delivery in September. Contract Size Initial Margin 5,000 bushels USD $4,375 Assume that: 1. The farmer knows from past years that the total cost of planting and harvesting the crop is about $6.30 per bushel. 2. In March, September Soybean futures (the time of harvest) are trading at $6.70 per bushel and the soybean farmer wishes to lock in the...

Suppose the demand for soybeans is ?(?) = 1100 − 20? and the supply for soybeans...

Suppose the demand for soybeans is ?(?) = 1100 − 20? and the supply for soybeans is ?(?) = 100 + 30?, where Q is billions of bushels of soybean per year and P is the price per bushel. Now suppose that the government supports a price of $30 using a deficiency payment program. 1C: What quantity will producers supply to the market? 1E: What is the change in consumer surplus under this policy? 1F: What is the change in...

The historical mean yield of soybeans from farms in Iowa is 32.9 bushels per acre. Following...

The historical mean yield of soybeans from farms in Iowa is 32.9 bushels per acre. Following a dry summer, a random sample of 40 Iowa farms is taken and the mean yield was found to be 30.78 bushels per acre with a standard deviation of 4.3. A hypothesis test is run to test the claim that the true mean yield of the dry summer was less than the historical mean. Which is the correct alternative hypothesis to test this claim?...

Soybeans are a homogenous product, produced by a large number of farmers. Pricing is transparent, making...

Soybeans are a homogenous product, produced by a large number of farmers. Pricing is transparent, making this a perfectly competitive industry. Seed, fertilizer, land and machinery are the key cost items. a. Are fertilizer costs a variable cost or a fixed cost? How about seed costs? Machinery costs? Explain. Assume that all producers have an identical cost structure. Moreover, suppose that there is a large pool of potential entrants who, if they were to enter this industry, would operate under...

Scenario: Soybeans are produced in many countries of the world, including Brazil. Consider the market for...

Scenario: Soybeans are produced in many countries of the world, including Brazil. Consider the market for soybeans in Brazil. Assume that the world price is below the domestic equilibrium price. a. In a graph, show how large the amount of imported soybeans is (no numerical answer required). Also, show the area on the graph that represents revenue that Brazil soybean farmers receive. b. Now let’s consider the effect of drought. On a new graph, show what happens to the total...

Suppose that there is currently $900 billion in circulation, $700 billion in deposits, $30 billion in...

Suppose that there is currently $900 billion in circulation, $700 billion in deposits, $30 billion in excess reserves, and $80 billion in required reserves. a. Calculate each of the following: Reserves _______900 + 700 = $1600 billion____________________ Monetary Base _______________________ Money Multiplier ______________________ Money Supply ________________________ b. Suppose that banks have borrowed $40 billion of their total reserves from the Fed. What’s the non-borrowed Monetary Base? c. Suppose that banks eliminate their excess reserves, using them to payback most of...

Suppose that in year 1 nominal GDP for a country is $5,200 billion. The GDP price...

Suppose that in year 1 nominal GDP for a country is $5,200 billion. The GDP price index is 114.9, and the population is 100 million. In year 1, the real wage averages $18 per hour and workers work 35 hours per week. In year 2, this country's nominal GDP is $5,800 billion. The GDP price index is 115.1, and the population is now 105 million. Assume that in year 2 the real wage averages $18 per hour and workers work...

Question

Suppose that the USDA expects that 53.3 billion bushels of soybeans will be produced this year...

Solutions

Expert Solution

Related Solutions

Suppose that the USDA expects that 53.3 billion bushels of soybeans will be produced this year...

Suppose a farmer anticipates to harvest 500,000 bushels of soybeans. Contract size is 5,000 bushels. The...

Suppose Brenda's farm, which operates in a perfectly competitive market for soybeans, produces 32,000 bushels of...

In March, a soybean farmer is planning to plant 100,000 bushels of soybeans, which will be...

Suppose the demand for soybeans is ?(?) = 1100 − 20? and the supply for soybeans...

The historical mean yield of soybeans from farms in Iowa is 32.9 bushels per acre. Following...

Soybeans are a homogenous product, produced by a large number of farmers. Pricing is transparent, making...

Scenario: Soybeans are produced in many countries of the world, including Brazil. Consider the market for...

Suppose that there is currently $900 billion in circulation, $700 billion in deposits, $30 billion in...

Suppose that in year 1 nominal GDP for a country is $5,200 billion. The GDP price...