Question

Suppose that you own a 20-acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $35 per acre for seed, $80 per acre for fertilizer, and $70 per acre for equipment rentals and labor. With these inputs, the land will yield 40 bushels of wheat per acre.If the price at which wheat can be sold is $5 per bushel and if farmers want to earn a normal profit of $10 per acre,What is the most that any farmer would pay to rent your 20 acres? $What if the price of wheat rose to $6 per bushel? $

Answer 1

Answer:

1. The most that the farmer would pay to rent 20 acre is $100.

2. The price of wheat rose to $6 per bushel is $900.

Explanation:

Given the information, we have:

Total cost per acre

= $35 + $80 + $70 = $185

Revenue from wheat per acre

= 40 x $5 = $200

Contribution per acre = $200 - $185 = $15

The most that the farmer would pay to rent 20 acre is

==>20 x ($15 - $10) = $100

If the price of wheat rose to $6, the most that farmer would pay

= 20 x (240 - 185 - 10)

= $900