There are 300 farms in the perfectly competitive local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $36 for every $600 invested.
Instructions: Enter your answers as whole numbers.
a. What is the percentage rate of return for these 298 dairies?
b. The other two dairies have a cost structure that generates profits of $52 for every $400 invested. What is their percentage rate of return?
c. Assuming that the normal rate of profit in the economy is 10 percent, and farms cannot copy each others' technology, will there be entry or exit? .
Will the change in the number of farms affect the two that earn $52 for every $400 invested? .
What will be the rate of return earned by most farms in the industry in long-run equilibrium?
If farms can copy each others' technology, what will be the rate of return eventually earned by all farms?
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