Doug's farm in Idaho has four major fields that he uses to grow potatoes. The productivity of each field follows:
___________ANNUAL YIELD, HUNDREDS OF POUNDS___
Field 1 10,000
Field 2 8,000
Field 3 5,000
Field 4 3,000
Assume that each field is the same size and that the variable costs of farming are $25,000 per year per field. The costs cover labor and machinery time, which is rented. Doug must decide each year how many fields to plant. Last year, potato farmers received $6.35 per 100 pounds.
How many fields did Doug plant? Explain.
By this year the price of potatoes had fallen to $4.50 per 100 pounds. How will this price decrease change Doug's decision? How will it affect the value of Doug's land?© BrainMass Inc. brainmass.com October 10, 2019, 3:27 am ad1c9bdddf
See the attached file. Profit increases as long as Marginal Revenue (MR) > Marginal Cost (MC). When the price ...
This solution shows how a farmer will use marginal analysis to decide how many potato fields to plant given the market price of potatoes.