Question

Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 30 watermelons. If he plants 2 bags of seeds, he gets 50 watermelons. If he plants 3 bags of seeds he gets 60 watermelons. A bag of seeds costs $100, and the costs of seeds are his only costs. Refer to Scenario 13-18. Which of the following statements is (are) true?
(i) Farmer Jack experiences decreasing marginal product.
(ii) Farmer Jack's production function is nonlinear. (iii) Farmer Jack's total cost curve is linear.
a. (i) only
b. (i) and (ii) only
c. (ii) only
d. (i) and (iii) only

Answer 1

Answer:

B) (i) and (ii) only

Explanation:

We can say that Jack is experiencing diminishing (or decreasing) marginal production since he needs to add more inputs (bags of seed) to produce smaller increases in his production of watermelons.

With the first bag of seeds he could produce 30 watermelons, so his productivity could be calculated as 30 per bag. Now with the second bag he can only produce 50 watermelons, so his productivity lowered to 25 per bag. We can elaborate the following table:

bags of seed     cost of seeds      watermelon produced           cost per unit

      1                         $100                            30                                  $3.33

      2                        $200                           50                                  $4

      3                        $300                            60                                  $5

As productivity lowers, the cost per unit increases.