1. Consider the market for potatoes, which is perfectly competitive. a. What happens to the market...

1. Consider the market for potatoes, which is perfectly competitive.

a. What happens to the market price if one potato farmer enters the market? Explain.

b. Suppose the price of corn rises. How would this affect the market price and quantity in the potato market? Use a supply-and-diagram to illustrate. Explain.

c. Suppose incomes fall. How would this affect the market price and quantity in the potato market? Use a supply-and-diagram to illustrate. Explain.

d. Suppose that a technological advance raises potato yields and, at the same time, new medical findings indicate harmful effects of potato consumption on health. How does these concurrent events affect the market price and quantity in the potato market? Use a supply-and-diagram to illustrate. Explain.

e. Suppose two events occur concurrently: (i) input prices rise, and (ii) incomes fall. How would these events affect the market price and quantity in the potato market? Use a supply-and-diagram to illustrate. Explain.

Expert Solution

Rahul Sunny answered 2 years ago

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