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15 Apr 2019

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

a) $100 per pound

b) $12.50 per pound

c) $80 per pound

d) $20 per pound

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16 Apr 2019

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Given Fixed costs $ 110 per acre, and the price drops to 58 cents per pound. Complet the Marginal Revenue. on the table below.

1. What is the most profitable cotton yield if the price is 80 cents per pound? What is the profit or loss per acre?

yield ___________________

Profit or loss ___________________

2. a. If the price does fall to 58 cents per pound, should the farmer produce any cotton?

( ) yes ( ) no

If yes profit maximamizing yield per acre ________________

Profit /loss per acre __________

b. How much would the farmer lose if he did not produce any cotton some year?

Loss per acre _______________

3. If the expected price is only 40 cents per pound, should the farmer try to produce anything?

( ) Yes ( ) No

If he does produce, how much? ___________ lbs per acre.

What would profit/loss be if he produces? ______________ (per acre)

4. what is the lowest price that the farmer can receive and adjust to cover all his costs? At what yield?

Price _______________

Yield _________________

Profit/loss _____________ (per acre)

5. At what price will the farmer top producing ? _________________

Total Product (lbs./acre)	Total variable cost	Total fixed cost	Total cost	Average Cost Per Lb.			Marginal cost	Marginal Revenue
Total Product (lbs./acre)	Total variable cost	Total fixed cost	Total cost	Fixed	Variable	Total	Marginal Cost	Marginal Revenue
200	65.80	110	175.8	.55	.33	.88	.224	?
250	77.00	110	187	.44	.31	.75	.073	?
300	80.68	110	190.68	.36	.27	.63	.14	?
350	87.59	110	197.59	.314	.25	.56	.15	?
400	94.94	110	204.94	.28	.24	.52	.18	?
450	103.80	110	213.8	.24	.23	.47	.23	?
500	115.30	110	225.30	.22	.23	.45	.02	?
550	133.30	110	243.30	.20	.24	.44	.36	?
600	155.55	110	265.55	.18	.26	.44	.45	?
650	182.80	110	292.80	.17	.28	.45	.56	?
700	215.55	110	325.55	.16	.31	.47	.66	?
750	254.30	110	364.30	.15	.34	.49	.78	?
800	295.80	110	405.8	.14	.37	.51	.83	?

coppercamel920

II. Mr. I.M Farmer has been producing 500 acres of irrigated cotton in the Texas High Plains. He is very concerned about increasing fuel costs because he uses a lot of fuel to pump irrigation water. He is also concerned because he believes that the price of cotton could drop to 58 cents per pound. He is not sure that he can profitably produce cotton if the price falls to 58 cents or less.

Assume you have been asked to analyze this problem. With the help of an extension agent, you developed the following cost schedule for irrigated cotton at various levels of production. All costs were figured on a per-acre basis. Fixed costs are $110 per acre. Total variable costs per acre are listed in the chart below.

Mr. Farmer has asked you to compute the profit-maximizing level of production and the amount of profit he can expect at various cotton prices. He particularly wants advice about whether or not he should produce any cotton at all if the price drops to 58 cents per pound. (Assume I. M. Farmer has no alternative to cotton; that is he either produces cotton or nothing.)

1. What is the most profitable cotton yield if the price is 80 cents per pound? What is the profit or loss per acre?

Yield_________________________________

Profit/Loss_________ _______________

2. a) If the price does fall to 58 cents per pound, should Mr. Farmer produce any cotton?

( ) Yes ( ) No

If yes, profit maximizing yield per acre___________________

Profit/loss per acre______ ______

b) How much would Mr. Farmer lose if he did not produce any cotton some year?

Loss per acre_____________________

3. If the expected price is only 40 cents per pound, should Mr. Farmer try to produce anything?

( ) Yes ( ) No

If he does produce, how much? ______ ___________lbs per acre.

What would Profit/Loss be if he produces? __ ________(per acre)

4. What is the lowest price that Mr. Farmer can receive and just cover all his costs? At what yield?

Price_________ _________________

Yield_________ ___________________

Profit/Loss_____ ____________(per acre)

5. At what price will Mr. Farmer stop producing? ____ ___________

Total Product (lbs./acre)	Total variable cost	Total fixed cost	Total cost	Average Cost Per Lb.			Marginal cost	Marginal Revenue
Total Product (lbs./acre)	Total variable cost	Total fixed cost	Total cost	Fixed	Variable	Total	Marginal Cost	Marginal Revenue
200	65.80	110	175.8	.55	.33	.88	.224	.58
250	77.00	110	187	.44	.31	.75	.073	.58
300	80.68	110	190.68	.36	.27	.63	.14	.58
350	87.59	110	197.59	.314	.25	.56	.15	.58
400	94.94	110	204.94	.28	.24	.52	.18	.58
450	103.80	110	213.8	.24	.23	.47	.23	.58
500	115.30	110	225.30	.22	.23	.45	.02	.58
550	133.30	110	243.30	.20	.24	.44	.36	.58
600	155.55	110	265.55	.18	.26	.44	.45	.58
650	182.80	110	292.80	.17	.28	.45	.56	.58
700	215.55	110	325.55	.16	.31	.47	.66	.58
750	254.30	110	364.30	.15	.34	.49	.78	.58
800	295.80	110	405.8	.14	.37	.51	.83	.58

goldchimpanzee975

1. In which market will a company arrange to receive currency for a transaction at a future date?

Select one:

a. the forward market

b. the currency futures market

c. the arbitrage market

d. the forward spot market

2. The U.S. dollar is overvalued and the peso is undervalued in the foreign exchange market

Select one:

a. if a visitor to Mexico from the United States can buy more goods in the United States
than he can buy in Mexico when he converts dollars to pesos.

b. if a visitor to Mexico from the United States can buy the same amount of goods in
Mexico as he can buy in the United States when he converts dollars to pesos.

c. if a visitor to Mexico from the United States can buy more goods in Mexico than he can
buy in the United States when he converts pesos to dollars.

d. if a visitor to Mexico from the United States can buy more goods in Mexico than he can
buy in the United States when he converts dollars to pesos.

3. Given the following data (t is current time; t+1 is time after one period)

E_t = Â¥ 110 = $1

E_t+1 = Â¥ 95 = $1

Current Interest rate in the US = i_US= 8%

If the interest parity condition is expected to hold, interest rates in Japan (i_Japan) should equal approximately:

Select one:

a. 3.38%

b. 8%

c. -5.64%

d. None of the above.

4. Suppose the Japanese interest rate is I% while the interest rate in Britain is 3%. Interest rate parity predicts that relative to the Japanese Yen,

Select one:

a. the British pound will depreciate by 4%.

b. the British pound will appreciate by 2%.

c. the British pound will depreciate by 2%.

d. the British pound will appreciate by 4%.

5. Suppose the U.S. grows more slowly than Canada. The best medium term prediction is that the

Select one:

a. U.S. interest rates will rise.

b. U.S. dollar will appreciate against the Canadian dollar.

c. U.S. dollar will depreciate against the Canadian dollar.

6. Purchasing Power Parity (PPP) implies that

Select one:

a. In the long run, a forward exchange rate can purchase an interest rate swap for the same
price as the spot rate.

b. In the medium run, a forward exchange rate can purchase an interest rate swap for the
same price as the spot rate.

c. The short run, a given amount of money can buy the same amount of goods, whether
they are purchased at home or abroad.

d. the long run, a given amount of money can buy the same amount of goods, whether
they are purchased at home or abroad.

7. The current account balance will fall if

Select one:

a. the real exchange rate depreciates and disposable income goes up

b. the real exchange rate appreciates or disposable income goes up

c. the real exchange rate depreciates or disposable income goes down

d. the real exchange rate appreciates and disposable income goes down

8. A person who paid $10 for an umbrella in the U.S. sees the exact same umbrella in a store in London, England for 6 British pounds. If the person could expect the real exchange rate to be 1 U.S. umbrella per 1 English umbrella, then the person could infer that the nominal exchange rate is

Select one:

a. 0.6 U.S. dollars per 1 English pound.

b. 1.67 U.S. dollars per 1 English pound.

c. 0.6 English pounds per I U.S. dollar.

d. 1.67 English pounds per 1 U.S. dollar.

9. A U.S. wine merchant travelling in France has found a French wine of the same quality as a U.S. wine they regularly sell. She assumes that the real exchange rate should be 1 case of U.S. wine equals one case of French wine. The French wine merchant will sell her a case of the French wine for 350 euros. She knows that a case of the equivalent U.S. wine sells for $400. The euro is selling in France for $1.20. Assuming transportation costs are zero, the U.S. wine merchant should

Select one:

a. buy the French wine and sell it in the U.S. and make a profit.

b. buy the U.S. wine and sell it in France and make a profit.

c. It doesn't matter either way; there is no profit in the deal.

d. None of the above.

10. In a fixed exchange rate system, how do countries address the problem of currency market pressures that threaten to lower or raise the value of their currency?

Select one:

a. If demand falls, then countries must increase demand by buying up the excess supply
with domestic currency.

b. If demand rises, countries must fill the excess demand for foreign currency by selling
their reserves.

c. If demand rises, then countries can adjust the value of the exchange rate to the desired
level.

d. A and B only.

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