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AG BM 101 (2)
Bierlien (2)

# HW 2.doc

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Department
Course
AG BM 101
Professor
Bierlien
Semester
Spring

Description
Name_________________________________ Agribusiness Management 101 Homework #2 Student ID No. _________________________ Max 50 Points 09 (SHOW ALL WORK) 1. Suppose you manage a mixed vegetable farm and just finished negotiating a supplycontract with Beech-Nut Baby Foods to buy all your “tender golden” sweet potatoes at a specified price of \$3.00 per pound (P Y. One of your first tasks is to decide how many pounds of fertilizer to apply to each acre in order to maximize your profits under the sweet potato contract. According to your past records – and with the help of your agricultural extension agent, you have already determined that every acre of your sweet potato operation can produce and sell Y pounds of sweet potatoes using X pounds per acre of fertilizers according to the schedule below. (a) Assume that (i) the rest of your inputs to sweet potato production are fixed and these fixed inputs, together, cost \$350 for each acre of production, and (ii) that fertilizer costs \$1.00 per pound (variable cost). On following table, fillin the values for total fixed costs (TFC), total variable costs (TVC), total costs (TC), average fixed costs (AFC), average variable costs (AVC), average total costs (ATC), and marginal cost (MC). Finally, add to the table the Marginal Revenue (MR), which equals the output price (P ) specified in the Beech-Nut contract. Y Sweet Fert. Sweet Total Total Total Averag Average Averag Margina Potato (lbs/A Potatoes Fixed Variable Cost e Fixed Variable e Total l Cost Price ) (lb/A) Cost Cost Cost Cost Cost (\$/lb) X Y TFC TVC TC AFC AVC ATC MC PY 0 55 350 0.00 350.00 6.36 0.00 6.36 3.00 0.38 25 120 350 25.00 375.00 2.92 0.21 3.13 3.00 0.56 50 165 350 50.00 400.00 2.12 0.30 2.42 3.00 1.00 75 190 350 75.00 425.00 1.84 0.39 2.24 3.00 1.67 100 205 350 100.00 450.00 1.71 0.49 2.20 3.00 2.27 125 216 350 125.00 475.00 1.62 0.58 2.20 3.00 6.25 150 220 350 150.00 500.00 1.59 0.68 2.27 3.00 8.33 175 223 350 175.00 525.00 1.57 0.78 2.35 3.00 12.50 200 225 350 200.00 550.00 1.56 0.89 2.44 3.00 (b) Using only the table that you completed in (a), what combination of fertilizer applied and sweet potatoes produced willmaximize per-acre profits given an output price of \$3.00 per pound of sweet potatoes? 125 pounds of fertilizer and 216 pounds of sweet potatoes per acre (c) Given your answer to (b), how much profit willyou make on every acre of sweet potato production under the Beech-Nut contract? Profit=total revenue-total cost= (\$3.00*216)-\$475=\$6
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