Question
In: Economics
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 the value of investment spending?
Solutions
Expert Solution
The farmer produces 899 bushels of wheat at a cost of $6 per bushel.
The total cost of 899 bushels = $6 x 899 = $5394
He sells all of the wheat to Firm F for $11 per bushel.
The total revenue the farmer earns = $ 11 x 899 = $ 9889
The total profit the farmer earns = Total revenue - Total cost
Total profit the farmer earns = $9889 - $5394 = $4495
So, the farmer earns the total profit of $4495
The firm F produces 500 pounds of flour from the wheat at a total cost of $23 per pound.
The total cost of production of 500 pounds of wheat = $23 x 500 = $11500
The firm F sells 475 pounds of flour to consumers for $31 per pound.
The total revenue the firm F earns from selling wheat = $31 x 475 = $14725
The total profit the farm F earns = Total revenue - Total cost
Or, the total profit the farm F earns = $14725 - $11500 = $3225
The total profit the farmer and farm F earn = $4495 + $ 3225 =
$7720
Rahul Sunny answered 2 years agoRelated Solutions
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