Why It Might Be Harder to Find Good Peaches This Summer

EconEye Admin

4 years ago

There are some hurdles between you and ripe peaches—supply chain issues and driver shortages, scarcity of packaging, labor shortages at manufacturing and production plants, and an inopportune freeze. Prices will run a little higher than in recent years.—tastingtable.com

Answer the following questions to check your understanding of the story.

1) The market for peaches is perfectly competitive. How is the marginal revenue of an individual peach farmer changing?

The individual peach farmer’s marginal revenue is _____________.

a) falling if the farmer can cut the marginal cost of harvesting his crop

b) rising or falling depending on the quantity of peaches the individual farmer harvests

c) rising because the price is rising, and each farmer is a price taker

d) rising if demand for an individual peach farmer’s peaches increases

Wrong! - The peach market is a perfectly competitive market. In a perfectly competitive market, what is the relationship between market price and marginal revenue? What influence does an individual peach farmer have on the marginal revenue that he faces?

That's Right! - The peach market is a perfectly competitive market. In perfect competition, a farmer’s marginal revenue equals market price, and each farmer is a price taker. So, when the market price rises, the marginal revenue faced by an individual peach farmer also rises.

2) How does an individual peach farmer respond to the “hurdles” described in the news clip?

Faced with “hurdles”, an individual peach farmer _______________.

a) stops production temporarily until market conditions improve

b) produces as many peaches as possible to generate extra revenue to pay for increased costs

c) maximizes profit by producing the quantity of peaches at which marginal cost equals marginal revenue

d) cuts production to minimize costs and maximize profit

Wrong! - The “hurdles” listed in the news clip increase a peach farmers’ costs. When costs change, what actions does a peach farmer take to maximize profit?

That's Right! - The “hurdles” listed in the news clip increase marginal cost for an individual peach farmer. But the peach farmer continues to maximize profit by producing the quantity of peaches at which marginal cost equals marginal revenue.

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