Question

A farmer has developed a new type of fertilizer. This new fertilizer costs 20

percent more to produce than the old fertilizer but has better results: The
same land now produces 25 percent more crops each year.
Which statement best describes one way the farm will be affected by using
this new fertilizer?
A. The farm's marginal cost for fertilizer will decrease.
B. The farm's marginal cost for fertilizer will increase.
C. The farm's opportunity cost for using fertilizer will decrease.
D. The farm's opportunity cost for using fertilizer will increase.

Answer 1

A

Explanation:

Marginal cost is the change in total cost as a result of increasing output by one unit

Marginal cost = Δcost / Δquantity

0.2 / 0.25 = 0.8

The marginal cost would decrease because the change in output is higher than the change in total cost

Marginal benefit would increase

Opportunity cost is the cost of the opportunity forgone when one alternative is chosen over other alternatives. There is no enough information given to determine the impact on opportunity cost