1.

The market demand for watermelon, which

follows a perfectly competitive market
structure, has been estimated as P = 95 -
0.015Q, where P is price (in rupees), and Q
is the output. The market supply is
expressed as P = 25 + 0.005Q. A typical
farmer that grows watermelons has a cost of
production,
C (q) = 125 + 7.5q + 5q2, where q is the
output of the farmer and the cost in rupees.

a. Determine the market equilibrium price for

watermelons. Also, determine the
production in the market.
b.Determine how much a typical farmer will
grow at the equilibrium price.
c. If all farmers had the same cost structure,
how many farmers would compete at the
equilibrium price computed in (a) above?
d.What is long run price for this market if the
cost structure stays the same as stated
above?
e. Determine the production level of the
market in the long run.

1
f. If all farmers had the same cost structure,
how many farmers will work in the long
run?