Question

John and Kim have a potato farm in Meridian, Idaho. They have four fields and the productivity of each field is: Field Annual Yield, Hundreds of Pounds 10,000 8,000 5,000 3,000 Aw Assume that each field is the same size and quality and that the variable costs of farming are $25,000 per field per year. In 2004, John and Kim received $6.35 per 100 pounds of potatoes; in 2005, they received $4.50 per 100 pounds of potatoes. Complete the following table. (Enter your responses as integers.) Marginal Revenue Product 2004 Marginal Revenue Product 2005 Field 1 Field 2 36,000 Field 3

Answer 1

Solution:-

Fields	Marginal Revenue Product 2004	Marginal Revenue Product 2005
Field - 1	(6.35 * 10,000) = 63,500	(4.50 * 10,000) = 45,000
Field - 2	(6.35 * 8,000) = 50,800	(4.50 * 8,000) = 36,000
Field – 3	(6.35 * 5,000) = 31,700	(4.50 * 5,000) = 22,500
Field – 4	(6.35 * 3,000) = 19,050	(4.50 * 3,000) = 13,500

John and Kim planted 3 Fields in 2004 and 2 fields in 2005.

John and Kim will plant the number of fields at the point where MRP is greater than or equal to marginal cost. Here the marginal cost is variable cost which equals to $25000.