Question

Consider an orange farmer in the state of Florida. Discuss the inputs into production for the orange farmer. Now, suppose that the orange farmer sells oranges by the bushel. Detail both the costs and benefits to the farmer from selling an additional bushel of oranges. Make sure to describe how the costs and benefits are likely to change as the farmer sells more bushels.

Answer 1

The inputs for the farmers for production of orange is - Farm Land, orange seeds, irrigation facilities, fertilizers, pesticides/insectices. Farm land is the fixed input and remaning inputs are variable input. So from each additional selling of bushel firm will earn revenue, as the orange is an agricultural products. Generally, the demand of agricultural products is less elastic but the nature of product is perishable i.e. doest not have long life. So the farmer tries to sell out all the bushel of oranges at the price in which he earns normal profit. Because agriculture market is a perfectly competitive market, so the sellers are earn normal profit under this market and price always remains fixed.

By selling each additional bushels, the average fixed cost per unit of oranges will declines, so from each additional bushel, farmer profit margin will increase, so farmer will try to sell more n more bushel of oranges to get maximise profit in the market.