An olive oil producing company is the only applicant for cultivated olives. The firm behaves as a price taker in the oil market, the equilibrium price being p = 20 per litre of oil. The oil production...

An olive oil producing company is the only applicant for cultivated olives. The firm behaves as a price taker in the oil market, the equilibrium price being p = 20 per litre of oil. The oil production function of the firm is f(y) =
2 * root(y), where "y" is the only productive factor (kilos of olives) and f(y) is the litres of oil produced. The inverse function of the supply of olives from farmers in the region is p^s(y) = 2y, where p^s(y) is the price per kilo of olives. It is asked:
(a) Determine the firm's demand for olives (Hint: determine the VPMg of each olive).
(b) Determine the quantity of olives that the firm will demand if it can exercise monopsony power.

(c) Compare result with (b) with a situation where the firm is not the only demander and is price taker in this market.