A purely competitive wheat farmer can sell any wheat he grows for $10 per bushel

Question

A purely competitive wheat farmer can sell any wheat he grows for $10 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 1000 bushels of wheat, the second acre 900, the third 800, and so on. Fill in the table given 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?

If the marginal cost of planting and harvesting an acre is $9,000 per acre for each of the five acres, how many acres should the farmer plant and harvest?

acres

Acre # That Acre's Yield That Acre's
Revenue TR MR 0 na $0 $0 na 1 $ $ $ 2 $ $ $ 3 $ $ $ 4 $ $ $ 5 $ $ $

Explanation / Answer

Consider the following table:

The above table has been drwan by using the following formulae:

Acre's revenue = Acre's yeild * Price per bushel

TR = Revenue of current acre + Revenue of previous acre

MR = change in TR / change in acre

We know MC = 9000 per acre

and profit maximizing output occurs when MR equals MC.

MR = MC = 9000 at 2 acres plantation and harvesting.

Thus the farmer should plant and harvest 2 acres of land.

Acre # That Acre's Yield That Acre's TR MR Revenue 0 na $0 $0 na 1 1000 bushels 10000 10000 10000 2 900 bushels 9000 19000 9000 3 800 bushels 8000 27000 8000 4 700 bushels 7000 34000 7000 5 600 bushels 6000 40000 6000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.