Sam farms a 400-acre farm. Two hundred acres of the land are particularly rich i

Question

Sam farms a 400-acre farm. Two hundred acres of the land are particularly rich in a nutrient that is favorable to growing corn but has no benefits for wheat. Sam can grow 30 bushels of corn or 25 bushels of wheat on each of these special acres. The other 200 acres are not rich in the nutrient, so Sam can grow only 10 bushels of corn or the same 25 bushels of wheat per acre.

Suppose that Sam considers starting with all of his land in corn. Then he thinks about increasing the amount of wheat that he grows. What is the opportunity cost, in bushels of corn, of the first bushel of wheat that he grows?

Explanation / Answer

Analyze the two opportunity costs: For the 200 acres with rich nutrients: Opportunity cost of 1 wheat = 30 corn/25 wheat = 1.2 bushels of corn / wheat For the 200 acres with nonrich nutrients: Opportunity cost of 1 wheat = 10 corn/25 wheat = 0.4 bushels of corn / wheat Since Sam will try to minimize the opportunity cost, he should naturally choose to grow corn in the 200 acres with non-rich nutrients. Therefore, the opportunity cost of the first bushel of wheat will be 0.4 bushels of corn, as calculated above. Hope this helped! :)

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