Question

A purely competitive wheat farmer can sell any wheat he grows for $20 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 900, the third 800, and so on.How many bushels will each of the farmer's five acres produce? How much revenue will each acre generate? What are the TR and the MR for each acre?

Answer 1

Answer:

The answer is explained below.

Explanation:

a) The first hectare can produce 1,000 bushels of wheat, the second 900, the third 800, the fourth produce 700 and the fifth would produce 600 bushels.

b) The revenue = price per bushel × number of bushel.

First hectare = 1000 × $20 = $20000

Second hectare = 900 × $20 = $18000

Third hectare = 800 × $20 = $16000

Fourth hectare = 700 × $20 = $14000

Fifth hectare = 600 × $20 = $12000

3) The cumulative revenue at the nth farm = revenue at nth farm + revenue at (n-1) farm

Also The marginal revenue at the nth farm = cumulative revenue at nth farm - cumulative revenue at (n-1) farm

Acres       Q      P

rice           TR each acre          Cumm. TR           Marginal. TR

1             1000    $20            $20000                   $20000              $20000

2            900      $20            $18000                    $38000              $18000

3             800     $20            $16000                    $54000               $16000

4              700     $20            $14000                    $68000               $14000

5              600     $20            $12000                    $80000               $12000