Asked by Hassaan Haider on May 20, 2024
Verified
Farmer John can produce as much corn as he wants at the going price of $48 per bushel.At his current production level,the marginal cost is $18.What should the company do?
A) Increase production
B) Decrease production
C) Stay at this level of production
D) None of the above
Corn
A cereal plant that yields large kernels set in rows on a cob; an important crop for food, animal feed, and industrial products.
Bushel
A unit of volume used primarily in the United States for measuring agricultural commodities, equivalent to approximately 35.24 liters.
- Apply the concept of marginal analysis to make optimal production decisions, including understanding when production should be increased or maintained.
Verified Answer
MR
Monse RamirezMay 25, 2024
Final Answer :
A
Explanation :
Since the current production level has a marginal cost of $18, which is less than the market price of $48, each additional bushel of corn produced will generate a profit of $30. Thus, the company can increase its profits by producing more corn until the marginal cost equals the market price. Therefore, the best choice would be to increase production.
Learning Objectives
- Apply the concept of marginal analysis to make optimal production decisions, including understanding when production should be increased or maintained.