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 1,000 bushels of wheat, the second acre 900, the third 800, and so on. a. Fill in 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? b. If the marginal cost of planting and harvesting an acre is $8,000 per acre for each of the five acres, how many acres should the farmer plant and harvest?

Answer 1

Land Acre	Output (no. of bushels)	Cumulative output	Marginal output	revenue generated by each acre	total revenue (cumulative)	Marginal revenue	Marginal cost
1	1000	1000	1000	10000	10000	10000	8000
2	900	1900	900	9000	19000	9000	8000
3	800	2700	800	8000	27000	8000	8000
4	700	3400	700	7000	34000	7000	8000
5	600	4000	600	6000	40000	6000	8000

B.

Farmer should plant and harvest 3 acres of land, beacuse at this level

Marginal revenue = Marginal cost = $8000

So, 3 acres of land should be planted and harvested.

Profit = 10000+9000+8000 - 3*8000 = $3000