Fine Farm is a perfectly competitive producer of rice. The adjacent figure shows Fine Farm's marginal cost of growing rice. Fine Farm cannot store rice, so all the rice grown must be sold; however, the price of rice is unknown when the managers must make a decision about how much rice to grow. With a 50/50 chance, the price might be $600 per ton or $200 per ton. To maximize their expected profit, Fine Farm's managers will produce A. 100 tons of rice B. 700 tons of rice ○ C. 100 tons of rice 50 percent of the time and 700 tons of rice the other 50 percent of the time OD. 400 tons of rice Price and cost (dollars per ton of rice) $700+ $600- $500- $400- $300- $200- $100- $0+ 0 100 200 300 400 500 600 700 Quantity (tons of rice per year) MC Q ☑

Fine Farm is a perfectly competitive producer of rice. The adjacent figure shows Fine Farm's marginal cost of growing rice. Fine Farm cannot store rice, so all the rice grown must be sold; however, the price of rice is unknown when the managers must make a decision about how much rice to grow. With a 50/50 chance, the price might be $600 per ton or $200 per ton. To maximize their expected profit, Fine Farm's managers will produce A. 100 tons of rice B. 700 tons of rice ○ C. 100 tons of rice 50 percent of the time and 700 tons of rice the other 50 percent of the time OD. 400 tons of rice Price and cost (dollars per ton of rice) $700+ $600- $500- $400- $300- $200- $100- $0+ 0 100 200 300 400 500 600 700 Quantity (tons of rice per year) MC Q ☑

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 15CQ

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