Final answer:
Farmers aim to maximize productivity by selecting an input quantity where marginal cost equals marginal revenue, ensuring each additional unit of output does not change profits. Once this balance at the profit-maximizing level of output is disrupted, either by increasing or decreasing production, profitability begins to decline.
Step-by-step explanation:
Farmers maximize productivity by choosing an input quantity in the region where marginal cost is equal to marginal revenue. This equates to the point where each additional unit of output contributes equally to cost and revenue, ensuring that profit is maximized. In the example provided, initially increasing production from a level of 60 to 70 allows the farmer to gain more revenue per unit than the cost of production, hence increasing profits. However, once the quantity produced reaches 80, the marginal cost and marginal revenue become equal—meaning any further increase in production would not alter profits. If production were increased beyond this point, say from 80 to 90, the marginal costs would surpass marginal revenues, leading to a decline in profits. Therefore, the profit-maximizing output level for the farmer is where the quantity of output is such that MR = MC, and any deviation from this point can result in less optimal financial outcomes.