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The agricultural market for corn can be characterized as a purely competitive industry. How might the following events affect the short-run cost curves and output for a firm in the industry?
Solution: A reduction in the cost of fertilizer that is sold to corn farmers. In this case, the short run total cost curve will shift downwards, consequently, the marginal cost curve will also shift downwards and output will increase. 2.The Internal Revenue Service (IRS) changes tax laws which increase the amount of depreciation that farmers can deduct for equipment. In this case,the cost to the firms increase and so the short run cost curve…

will shift upwardsand consequently output will decrease. 3.The market price for corn falls. In this case, the short run cost curve will remain the same.But since in this case Price falls. the price will meet the marginal cost curve at a lower level of output and so, ouput will fall. In this case,


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