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Suppose that you own a 20-acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $30 per acre for seed, $80 per acre for fertilizer, and $70 per acre for equipment rentals and labor. With these inputs, the land will yield 40 bushels of wheat per acre. Now suppose the price at which wheat can be sold is $7 per bushel and that farmers want to earn a normal profit of $10 per acre.

a. What is the most that any farmer would pay to rent your 20 acres? $.
b. What if the price of wheat rose to $8 per bushel? $.

User Botkop
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2 Answers

5 votes

Answer:

$1800

$2600

Step-by-step explanation:

Profit = Total revenue - Total cost

Total revenue = (40 bushels × $7) x 20 acres = $5,600

Total cost = 20 x ($30 + $70 + $80) = $3,600

Profit = $5600 - $3600 = $2000

If the farmer wants to make a profit of at $10 per acre, total profit would be $10 × 20 = $200

The most the farmer would be willing to pay as rent would be : $2000 - $200 = $1800

B. If wheat price rose to $8 :

Total revenue = (40 bushels × $8) x 20 acres = $6400

Profit = $6,400 - $3,600 = $2,800

If the farmer wants to make a profit of at $10 per acre, total profit would be $10 × 20 = $200

The most the farmer would be willing to pay as rent would be : $2,800 - $200 = $2,600

I hope my answer helps you

User Selima
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7.1k points
6 votes

Answer:

a. What is the most that any farmer would pay to rent your 20 acres?

  • $1,800 per 20 acres

b. What if the price of wheat rose to $8 per bushel?

  • $2,600 per 20 acres

Step-by-step explanation:

cost per acre:

  • seeds $30
  • fertilizer $80
  • equipment and labor $70

total cost $180 per acre + expected profit = $190 per acre x 20 acres = $3,800

total revenue = 40 bushels per acre x $7 per bushel = $280 per acre x 20 acres = $5,600

a farmer will be willing to pay = $5,600 - $3,800 = $1,800 per 20 acres

if the price of wheat rises to $8 per bushel, then the farmers should be able to pay up to (40 x $8 x 20) - $3,800 = $6,400 - $3,800 = $2,600

User Petrusion
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7.4k points