Question

A producer is deciding whether they should produce corn or not. Based on the budget below, what should the producer do? Calculate TR, TVC, TFC, TC, AVC, AFC, ATC below for one acre of corn. Put final answers in the following boxes, then submit your work in the space provided below by either typing or uploading.

Corn budget, one acre
Yield per acre	228
Price per bushel	$3.20
Total revenue per acre	BLANK A
Variable Costs
Fertilizer	$              140.00
Pesticides	$                65.00
Seed	$              115.00
Drying	$                25.00
Storage	$                  8.00
Crop Insurance	$                27.00
Fuel	$                19.00
Utilities	$                15.00
Labor (variable)	$                35.00
Total Variable Costs	BLANK B
Fixed costs
Labor (Fixed)	$                45.00
Building repairs and depreciation	$                28.00
Insurance	$                14.00
Interest	$                12.00
Misc	$                10.00
Land rent	$              200.00
Total Fixed Costs	BLANK C
Total Costs	BLANK D
Average fixed cost	BLANK E
Average variable cost	BLANK F
Average total costs	BLANK G

Question 30 (3 points)

What is total revenue per acre? [Blank A- round to two decimal places]

Question 30 options:

Question 31 (3 points)

What are total variable costs per acre? [Blank B-round to two decimal places]

Question 31 options:

Question 32 (3 points)

What are total fixed costs per acre? [Blank C-round to two decimal places]

Question 32 options:

Question 33 (3 points)

What are total costs per acre? [Blank D-round to two decimal places]

Question 33 options:

Question 34 (3 points)

What are average fixed costs per bushel? [Blank E-round to two decimal places]

Question 34 options:

Question 35 (3 points)

What are average variable costs per bushel? [Blank F-round to two decimal places]

Question 35 options:

Question 36 (3 points)

What are average total costs per bushel? [Blank G-round to two decimal places]

Question 36 options:

Question 37 (3 points)

What should the producer do based on the above budget?

Question 37 options:

	The producer should produce the corn and will make a profit.
	The producer should produce; they will incur a loss that is less than TFC.
	The producer should not produce; they will incur a loss equal to the TFC.

Answer 1

1. Revenue :

Yield per acre = 228 bushels

Price per bushel = $3.20

Total Revenue per acre = 228 × $3.20 = 729.60

Therefore,

A = $729.60

2. Variable Costs:

Total Variable Costs = Costs of fertilizer + Pesticides + Seed + Drying + Storage + Crop Insurance + Fuel + Utilities + Labor(variable).

Total Variable Cost = $140 + $65 + $115 + $25 + $8 + $27 + $19 + $15 + $35

= $449.00

Therefore,

B = $449.00

​​​​3. Fixed Costs :

Total Fixed Costs = Costs of Labor(Fixed) + Building repairs and depreciation + Insurance + Interest + Misc + Land rent

= $45 + $28 + $14 + $12 + $10 + $200

= $309.00

Therefore,

C = $309.00

4. Total Costs:

Total Cost = Variable Cost + Fixed cost

= $449.00 + $309.00

= $758.00

Therefore,

D = $758.00

5. Average Fixed cost Per Bushel :

Average Fixed cost per bushel = Total Fixed cost per acre/Number of bushels.

= 309/228

= $1.35

Therefore,

E = $1.35

6. Average Variable Price per bushel :

Average variable price per bushel = Total Variable Price per acre/Number of bushels

= 449/228

= $1.969

Therefore,

F = $1.97

7. Average Total Costs Per Bushel :

Average Total Costs per bushel = Average Variable costs per bushel + Average Fixed costs per bushel

= $1.97 + $ 1.35

= $3.32

Therefore,

G = $3.32

Now to check whether producing Corn is profitable or not, we subtract Average cost per bushel from the selling price per bushel

so, $3.20 - $3.32

= - $0.12

Therefore, the producer should not produce corn.

They will incur a loss equal to the Total fixed cost(TFC) i.e. the producers will incur a loss of $309.