Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing ________ bushels of soybeans, and his profit will be ________.
A) fewer; the same
B) fewer; lower
C) more; the same
D) the same number of; the same

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if the market price of soybeans falls, the farmer will adjust his production to the point where marginal cost equals the new, lower market price. This typically results in producing fewer bushels of soybeans. Additionally, because the price has decreased, the farmer's profit will also be lower, assuming costs remain unchanged.

Assume Soybeans Are Produced in a Perfectly Competitive Market