Gus has 20 acres of land in cultivation and is currently planting both soybeans and peanuts.The last acre planted in soybeans yielded 20 bushels,and the last bushel of soybeans added $0.50 to Gus's total revenue.The last acre planted in peanuts yielded 10 bushels and the last bushel of peanuts added $1 to Gus's total revenue.Gus:
A)is maximizing profit.
B)should devote more acres to soybeans and fewer to peanuts.
C)should devote more acres to peanuts and fewer to soybeans.
D)should devote 10 acres to each crop.

Question

Quizplus · Accepted Answer

To determine whether Gus is maximizing profit, we need to compare the marginal revenue (MR) and marginal cost (MC) for both crops.

For soybeans, the MR is $0.50 per bushel, and the last acre added 20 bushels, so the MR for the 20th acre is $10. The MC for soybeans is the cost of planting and harvesting the crop on one additional acre, and based on the information given, we don't know the exact cost. However, it's safe to assume that the MC for the 20th acre is less than $10, since that's the revenue generated from that acre.

For peanuts, the MR is $1 per bushel, and the last acre added 10 bushels, so the MR for the 20th acre is $10. The MC for peanuts is also unknown, but we can assume it's less than $10 based on the fact that Gus is planting both crops.

Since the MR for both crops is equal to the revenue generated from the last acre planted, and we can assume the MC is less than that, Gus is maximizing profit by continuing to plant both crops.

Therefore, the best choice is A) is maximizing profit.

Gus Has 20 Acres of Land in Cultivation and Is