Question

2. According to data from the U.S. Department of Agri- culture's National Agricultural Statistics Service, 124 million acres of land in the United States were used for wheat or corn farming in a recent year. Of those 124 million acres, farmers used 50 million acres to grow 2.158 billion bushels of wheat and 74 million acres to grow 11.807 billion bushels of corn. Sup- pose that U.S. wheat and corn farming is efficient in production. At that production point, the opportunity cost of producing 1 additional bushel of wheat is 1.7 fewer bushels of corn. However, because farmers have increasing opportunity costs, additional bush- els of wheat have an opportunity cost greater than 1.7 bushels of corn. For each of the following produc- tion points, decide whether that production point is (i) feasible and efficient in production, (ii) feasible but not efficient in production, (iii) not feasible, or (iv) unclear as to whether or not it is feasible. a. Farmers use 40 million acres of land to produce 1.8 billion bushels of wheat, and they use 60 million acres of land to produce 9 billion bushels of corn. The remaining 24 million acres are left unused. b. From their original production point, farmers trans- fer 40 million acres of land from corn to wheat pro- duction. They now produce 3.158 billion bushels of wheat and 10.107 bushels of corn. c. Farmers reduce their production of wheat to 2 billion bushels and increase their production of corn to 12.044 billion bushels. Along the production possibility frontier, the opportunity cost of going from 11.807 billion bushels of corn to 12.044 billion bushels of corn is 0.666 bushel of wheat per bushel of corn.

Answer 1

a)The production point is feasible but not efficient in production because 24 million acres of land are unused, so they have to produce foodgrains in given resources of land without using the 24 million acres of land. They can produce more if all available farm land is cultivated.

b)The production point is not feasible because the opportunity of cost of producing is increasing, with considering the original production point,the opportunity of cost of producing one extra bushes of wheat must be more than 1.7 bushes of corn.

c)The production point is feasible and efficient in production because The opportunity of cost of producing is increasing from 11.807 to 12.044 billion bushes of corn is 0.666 and the bushes of wheat per bushel of corn lead to (12.044 - 11.807)* 0.666 = 0.158 bushes of wheat. Therefore, the loss on wheat bushel is reduced from 2.158 billion bushes to 2.00 billion bushes.