Question

Part IV: Problem solving (15 pts. each) 1. Part a: The following table shows multiple output levels (bushels/acre), output price, and total costs. Calculate total revenue, marginal revenue, and marginal cost. Crop Plan Yield Change in Crop Yield Total Price Revenue Marginal Revenue Marginal Total Cost Cost 100 10 $8.00 $650.00 1 2 20 $8.00 $775.00 120 135 13 15 $8.00 $875.00 4 150 15 $8.00 $995.00 5 160 10 $8.00 $1,100.00 16 166 16 $8.00 $1,200.00 17 164 -2 $8.00 $1,250.00 Part b: Using your answer to “Part a” what is the profit maximizing level of crop yield? bushels/acre

Answer 1

A
	Plan	Crop Yield	Change in Crop yield	Price	Total Revenue	marginal revenue	Total Cost	Total Profit	marginal Cost
	1	100	0	8.00	800	800	650	150	650
	2	120	20	8.00	960	160	775	185	125
	3	135	15	8.00	1080	120	875	205	100
	4	150	15	8.00	1200	120	995	205	120
	5	160	10	8.00	1280	80	1100	180	105
	6	166	6	8.00	1328	48	1200	128	100
	7	164	-2	8.00	1312	-16	1250	62	50
B	Profit maximising levels
	Whichever way we choose to calculate the optimum profit in the above problem,
	it occurs at the point where marginal revenue = marginal cost.
	So Crop Yield=150 where profit is maximum