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18 November, 06:29

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 $35 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. If the price at which wheat can be sold is $5 per bushel and if farmers want to earn a normal profit of $10 per acre, What is the most that any farmer would pay to rent your 20 acres? $What if the price of wheat rose to $6 per bushel? $

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  1. 18 November, 10:14
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    1. The most that the farmer would pay to rent 20 acre is $100.

    2. The price of wheat rose to $6 per bushel is $900.

    Explanation:

    Given the information, we have:

    Total cost per acre

    = $35 + $80 + $70 = $185

    Revenue from wheat per acre

    = 40 x $5 = $200

    Contribution per acre = $200 - $185 = $15

    The most that the farmer would pay to rent 20 acre is

    ==>20 x ($15 - $10) = $100

    If the price of wheat rose to $6, the most that farmer would pay

    = 20 x (240 - 185 - 10)

    = $900
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