A farmer has to make a decision on what combination of seed, water, fertilizer a

Question

A farmer has to make a decision on what combination of seed, water, fertilizer and pest control will be most profitable for the coming growing season. The local university provided the following information to the farmer of possible alternatives. 1. Cost/acre $600 1,500 1,800 2,100 Income/acre $800 1,900 2,250 2,500 Alternative 13 a. What selection criteria should the farmer use? C b. Which alternative should the farmer choose based on the criterion? (Must show calculation clearly) Answer (which alternative?:

Explanation / Answer

a.what selection criteria should the farmer use?

contribution per acre is the criteria to be used by farmer.

contribution per acre = income per acre - cost per acre.

b.which alternative should the farmer choose based on the criterion?

Alternative C

The following is the calculation:

SInce alternative C gives the maximum contribution per acre ($450), it should be selected.

Alternative cost / acre income / acre contribution / acre A $600 $800 $200 B 1500 1900 $400 C 1800 2250 $450 D 2100 2500 $400

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