Scenario 13-17
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
-Refer to Scenario 13-17. Farmer Brown's marginal-cost curve is

Question

Quizplus · Accepted Answer

As Farmer Brown plants more and more bags of seeds, his marginal cost of production increases because he has to spend more money on buying additional bags of seeds. Therefore, his marginal-cost curve is increasing.

Best choice(s):
Answer: C) Plant 2 bags of seeds 
 The marginal benefit of planting an additional bag of seeds decreases after planting 2 bags because the marginal product of labor (MP) decreases. MP for the third bag is only 3 bushels, whereas the MP for the second bag is 4 bushels. Additionally, the marginal cost of planting a third bag of seeds outweighs the marginal benefit, as the cost of the seeds is $120 and the additional yield is only 3 bushels. Therefore, the best choice for Farmer Brown is to plant 2 bags of seeds, which gives him a total of 9 bushels (5 from 1 bag and 4 from the second bag) and the highest total profit of $360 (total revenue - total cost).

Scenario 13-17 If Farmer Brown Plants No Seeds on His Farm, He