Assume that the graph illustrates the marginal, average variable and average total cost curves of a typical soybean grower and that the wholesale market for soy beans is a perfectly competitive market.

1) As output expands, at what level of output does this grower first start to experience diminishing marginal productivity of labor?

2) Assume that the current market price at the wholesale level is $5 per pound. How much soybean will this typical grower produce?

3) Is there a price below which the grower will not bother to cultivate & harvest his crop, but will just let the beans rot on the tree?

4) Assume that as the industry expands (or contracts) the prices of the variable inputs it uses do not change. Is $5 per pound the long run equilibrium price in this market? If so, explain why. If not, explain why not and identify the long run equilibrium price.

5) Suppose there is a shortage of experienced farm labor in the soybean growing regions, so that as the industry expands the wages paid to farm labor rise. How would this affect your conclusion in part (4) about the long run equilibrium price of soybean?

6) Suppose that technological innovation in soybean cultivation greatly reduced the amount of labor used per ton of beans harvested but required farmers to invest in substantially more large scale capital equipment and computerized hydration management systems.
Draw a diagram illustrating the effect on the typical grower's average total cost curve. (i.e. draw a "before" and "after" ATC schedule). What is the effect of this technological change on the minimum efficient scale of production?
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*****Graph:
tinypic . com/r/11m7urb/5

thanks

1) at the minimum of the MC curve.

2) Where MC=MR and MR is price.
3) Sure, at any price below the minimum of the AVC curve
4) The industry will expand until Price equals the minimum of the ATC curve. (Assuming this particular soybean grower doesnt have a particular advantage or disadvantage. That is, any other soybean producer will have the same cost structure.)
5) As the industry expands, all of the MC,AVC, and ATC cost curves shift up. So, equiliburium will occur where price=min ATC (for the marginal firm), however, ATC will be higher than shown on the graph.
6) I would think a machine as described would have much less diminishing marginal returns. So, the ATC curve would be much flatter, the new minimum point being to the right of the only minimum point

could you please explain questions 4 and 5? those are a bit unclear.

1) To determine the level of output at which the grower first starts to experience diminishing marginal productivity of labor, you need to analyze the marginal productivity of labor curve on the graph. The marginal productivity of labor measures the additional output that is generated by each additional unit of labor employed. As labor input increases, there comes a point where the additional output generated by each additional unit of labor starts to decline, indicating diminishing marginal productivity. The level of output at which this occurs is the point of diminishing marginal productivity of labor for the grower.

To find this point on the graph, locate the marginal productivity of labor curve and identify the level of output at which it starts to slope downward.

2) To determine how much soybean the typical grower will produce at the current market price of $5 per pound, you need to examine the average variable cost curve on the graph. The average variable cost curve represents the cost per unit of producing additional output.

Find the price level of $5 on the vertical axis and trace it horizontally until you intersect with the average variable cost curve. Then, trace vertically down to the horizontal axis to find the corresponding level of output that the grower will produce at the given market price.

3) The graph does not provide information specifically about the price below which the grower will let the beans rot on the tree. However, based on the concept of economic rationality, it is unlikely that the grower would let the beans rot on the tree if the price is higher than the cost of cultivation and harvest. The grower would aim to cover at least the variable cost of production and would not produce if the price falls below it. Without specific cost information, it is not possible to determine the exact price threshold.

4) In a perfectly competitive market, the long-run equilibrium price is determined by the intersection of the industry's supply and demand curves. However, the graph provided does not show the market supply and demand curves. Without this information, we cannot determine if $5 per pound is the long-run equilibrium price. Additional information is needed to ascertain whether the industry is in a long-run equilibrium or not.

5) If there is a shortage of experienced farm labor in the soybean growing regions, causing wages for farm labor to rise as the industry expands, this would impact the long-run equilibrium price of soybeans. With increasing wages, the average variable cost for the grower would rise, leading to a higher minimum efficient scale of production. This means that the long-run equilibrium price would likely be higher than in the absence of the labor shortage, as higher labor costs increase the overall cost of production.

6) Unfortunately, a text-based platform like this does not support the ability to draw diagrams. However, I can explain the expected effect of the technological change on the typical grower's average total cost (ATC) curve.

With technological innovation that reduces the amount of labor used per ton of beans harvested but requires investment in large-scale capital equipment and computerized hydration management systems, the ATC curve would shift downward. This means that the average total cost of producing each unit of output would decrease.

The effect on the minimum efficient scale of production depends on the nature of the technological change. If the new technology enables more efficient production at smaller scales, the minimum efficient scale may decrease. On the other hand, if the new technology favors larger-scale production, the minimum efficient scale may increase. It would be necessary to have additional information about the specific technological change to accurately determine the effect on the minimum efficient scale of production.