A purely competitive wheat farmer can sell any wheat he grows for $25 per bushel

Question

A purely competitive wheat farmer can sell any wheat he grows for $25 per bushel. His five acres of land show diminishing returns because some are better suited for wheat production than others. The first acre can produce 1,000 bushels of wheat, the second acre 900, the third 800, and so on.

a. Use the table below to answer the following questions. How many bushels will each of the farmer’s five acres produce? How much revenue will each acre generate? What are the TR and MR for each acre?

Instructions: Enter your answers as whole numbers.

b. If the marginal cost of planting and harvesting an acre is $20,000 per acre for each of the five acres, how many acres should the farmer plant and harvest?  acres.

Numbers of Acres That Acre's Yield That Acre's Revenue TR MR 0 — $0 $0 — 1 2 3 4 5

Explanation / Answer

b. Three acres at maximuM. as after that MC will be higher than MR.

numbers of Acres That Acre's Yield That Acre's Revenue TR MR 0 0 0 0 NA 1                            1,000                                           25,000                                 25,000      25,000 2                                900                                           22,500                                 47,500      22,500 3                                800                                           20,000                                 67,500      20,000 4                                700                                           17,500                                 85,000      17,500 5                                600                                           15,000                               100,000      15,000

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