Question

Philo T. Farmsworth is a corn farmer with a 40-acre tract of land. Each acre can produce 100 bushels of corn. The cost of planting the tract in corn is $20,000, and the cost of harvesting the corn is $10,000. In May, when corn is selling for $10 per bushel, Philo plants his crop. In September the price of corn has fallen to $2 per bushel. What should Philo do? Explain, assuming that there are no costs involved with bringing the corn to market to sell.

Answer 1

Answer:Philo should sell.

Step-by-step explanation:

If price falls $2, the final price would be $8. So Philo's income will be:

40 acre x 100 bushel x $8 = $32.000

And costs will be:

Planting cost = $20.000

Harvesting cost = $10.000

Total cost = $30.000

$32.000 - $30.000 = $2.000

So Philo's earning will be $2.000