A farmer is deciding whether or not to add fertiliser to his or her crops. If the farmer adds 1 kilogram of fertiliser per hectare, the value of the resulting crops rises from $80 to $100 per hectare. According to marginal analysis, the farmer should add fertiliser if it costs less than:

Question

Quizplus · Accepted Answer

Marginal analysis involves comparing the cost of an additional unit of input (in this case, 1 kilogram of fertiliser) to the increase in revenue generated by using that input (the increase in crop value from $80 to $100 per hectare). The marginal benefit of adding fertiliser is $20 ($100 - $80), and the marginal cost is the cost of 1 kilogram of fertiliser. Thus, the farmer should add fertiliser if the cost of 1 kilogram is less than $20. The only answer choice that fits this criteria is B) $20 per kilogram.

A Farmer Is Deciding Whether or Not to Add Fertiliser