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16 December, 09:06

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

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Answers (1)
  1. 16 December, 09:32
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    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.
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