A purely competitive wheat farmer can sell any wheat he grows for $20 per bushel

Question

A purely competitive wheat farmer can sell any wheat he grows for $20 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. 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? If the marginal cost of planting and harvesting an acre is $18,000 per acre for each of the five acres, how many acres should the farmer plant and harvest? acres.

Explanation / Answer

That Acre's Revenue($)

(That Acre's Yield * price per bushel i.e $20)

TR($)

TR = cummulative total of That Acre's Yield.

MR = Changes in TR / Changes in numbers of acres

b. Where MR of planting and harvesting = MC of planting and harvesting, at that amount of acres of land the farmer should plant and harvest.

So, here MC = $18,000.

And at 2 acres of land the MR is $18000.

So, the farmer should plant and harvest at 2 acres of land.

Numbers of acres That Acre's Yield

That Acre's Revenue($)

(That Acre's Yield * price per bushel i.e $20)

TR($)

MR($) 0 - 0 0 - 1 1000 20000 20000 20000 2 900 18000 38000 18000 3 800 16000 54000 16000 4 700 14000 68000 14000 5 600 12000 80000 12000

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