Sweet Husks is a perfectly competitive corn farm. If the expected price of an ear of corn changes from $0.30 to $0.33, Sweet Husks' expected marginal benefit from holding additional ears of corn in inventory will shift ________ and the profit- maximizing number of ears of corn to hold in inventory will _______.

Question

Quizplus · Accepted Answer

The expected marginal benefit from holding additional ears of corn in inventory will shift upward because the expected price (and thus the expected revenue from selling an additional ear of corn) has increased. As a result, the profit-maximizing number of ears of corn to hold in inventory will increase, as it becomes more profitable to sell more corn at the higher price.

Sweet Husks Is a Perfectly Competitive Corn Farm