question archive The market for olive oil in Spain is perfectly competitive
The market for olive oil in Spain is perfectly competitive
Subject:EconomicsPrice: Bought3
The market for olive oil in Spain is perfectly competitive. Market estimates indicate that the
demand and supply of olive oil are given by
Supply function: ???? =125+3????2
Demand function: ???? =3250−2????2
where ???? is the price (per thousand liters, measured in €) and ???? is the quantity of olive oil supplied
and demanded (in thousands of liters).
Some of the olive oil producers form an association to put lobbying pressure on the
government. As a result, the government decides to set a price floor (a limit on how low a
price can be charged for a product) at Pf.
(Note: Pf is equal to 2100 +x*5 where x are the last two digits of your student ID number. For
For example, if the last two digits of your student ID number are 17, then ???????? =2100+17∗5=2185)
Write down (do not solve) the optimization problem that the olive oil producers’
the association would need to solve to find the optimal price floor. Explain in words the
optimization problem you have written down.
