Assume wheat is selling for $4.00 per bushel in Area A and selling for $3.70 per...

Assume wheat is selling for $4.00 per bushel in Area A and selling for $3.70 per bushel in Area B. Further assume transfer costs between Area A and Area B is $0.35. What would you do? Explain. Show your work where appropriate.

Expert Solution

If price of bushel is $4.00 in area A and $3.70 in area B

Cost of transfer between area A and B is $0.35, I should let market in area A and B to work without interference. I should interfere if transfer cost between A and B is less than $0.30 such that I can earn a profit by buying from cheaper market and selling in other market which will help me in generating profit.

Rahul Sunny answered 2 years ago

A purely competitive wheat farmer can sell any wheat he grows for $10 per bushel. His...

A purely competitive wheat farmer can sell any wheat he grows for $10 per bushel. His five hectares of land show diminishing returns, because some are better suited for wheat production than others. The first hectare can produce 1000 bushels of wheat, the second hectare 900, the third 800, and so on. Fill in the table given below to answer the following questions. How many bushels will each of the farmer’s five hectares produce? How much revenue will each hectare...

Farmer Jones is producing wheat and must accept the market price of $7.00 per bushel. At...

Farmer Jones is producing wheat and must accept the market price of $7.00 per bushel. At this time, her average total costs and her marginal costs both equal $9.50 per bushel. Her minimum average variable costs are $7.50 per bushel. In order to maximize profits or minimize losses in the short run, farmer Jones should A. increase output. B. continue producing, but reduce output. C. increase selling price. D. produce zero output and shut down.

The farmer produces 899 bushels of wheat at a total cost of $6 per bushel. He...

The farmer produces 899 bushels of wheat at a total cost of $6 per bushel. He sells all of the wheat to Firm F for $11 per bushel. Firm F produces 500 pounds of flour from the wheat at a total cost of $23 per pound (including the amount paid to the farmer for the wheat). Firm F sells 475 pounds of flour to consumers for $31 per pound. There are no other firms in this simple economy. What is...

A farmer grows a bushel of wheat and sells it to a miller for $1.00. The...

A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is the value added by each person? What is GDP?

A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel.

a) A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change would lead to a margin call?b) How does the cost-of-carry argument for commodity futures differ from futures written on other classes on assets? How would you explain differences in the sign and magnitude of the basis across different classes of commodities?

The spot price of corn is $17.2 per bushel. Storage costs are $0.32 per bushel per...

The spot price of corn is $17.2 per bushel. Storage costs are $0.32 per bushel per year. Payment of storage costs occurs in advance for the next three months. Assuming that interest rates are 7% per annum, calculate the forward price of corn for delivery in 12 months. Appreciate if you show me the calculation steps. Thank you!!

). A farmer knows from experience that his wheat harvest Q (in bushel

). A farmer knows from experience that his wheat harvest Q (in bushels) has the probability distribution given by: Q = 150 with probability 0.30 , = 170 with probability 0.45, =200 with probability 0.25; note that the probabilities add up to 1 as they are required by a probability distribution. Suppose the demand function he faces in the market place is given by: p = 320 - 0.5 Q where p = price in dollars per bushel. Let R = total revenue = p x Q. [Note: You may find it convenient to first derive...

Suppose the spot price of a bushel of wheat is $2.00, the annual storage cost is...

Suppose the spot price of a bushel of wheat is $2.00, the annual storage cost is $0.30 per/bushel, the risk‐free rate is 8%, and the costs of transporting wheat from the destination point specified on the futures contract to a local grain elevator, or vice versa, is $0.01/bu. a. Use the cost‐of‐carry model to determine the equilibrium price of a September wheat futures contract (expiration of T = 0.25). b. Explain the arbitrage strategy an arbitrageur would pursue if the...

Q1. Assume that American rice is sold for $100 per bushel, Japanese rice is sold 16,000...

Q1. Assume that American rice is sold for $100 per bushel, Japanese rice is sold 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar. Assume that the nominal exchange rate remains unchanged. Select one: a. Buy a bushel of American rice and then sell it in Japan, making a profit of 80,000 yen. b. Buy a bushel of American rice and then sell it in Japan, making a profit of 100 dollars. c. Buy a...

Mario consumes eggplants and tomatoes in the ratio of 1 bushel of eggplants per 1 bushel...

Mario consumes eggplants and tomatoes in the ratio of 1 bushel of eggplants per 1 bushel of tomatoes. His garden yields 30 bushels of eggplants and 10 bushels of tomatoes. He initially faced prices of $25 per bushel for each vegetable, but the price of eggplants rose to $100 per bushel, while the price of tomatoes stayed unchanged. After the price change, he would a. increase his eggplant consumption by 6 bushels. b. decrease his eggplant consumption by at least...

Question