Question

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

Answer 1

Given that the marginal cost is $18, and the price per Bushel of $48, the farmer can choose to increase production or not. This is because at this margin, the return on investment will be:
(48-18)/18*100
=166.67%
Which means he'll still be profitable if he chooses to do nothing. The correct answer is:
c. stay at this level of production.