According to data from the U.S. Department of $\begin{array}{lll}\text { Agriculture's } & \text { National } & \text { Agricultural } & \text { Statistics }\end{array}$ Service, 124 million acres of land in the United States were used for wheat or corn farming in a recent year. Of those 124 million acres, farmers used 50 million acres to grow 2.158 billion bushels of wheat and 74 million acres to grow 11.807 billion bushels of corn. Suppose that U.S. wheat and corn farming is efficient in production. At that production point, the opportunity cost of producing 1 additional bushel of wheat is 1.7 fewer bushels of corn. However, because farmers have increasing opportunity costs, additional bushels of wheat have an opportunity cost greater than 1.7 bushels of corn. For each of the following production points, decide whether that production point is (i) feasible and efficient in production, (ii) feasible but not efficient in production, (iii) not feasible, or (iv) unclear as to whether or not it is feasible. a. Farmers use 40 million acres of land to produce 1.8 billion bushels of wheat, and they use 60 million acres of land to produce 9 billion bushels of corn. The remaining 24 million acres are left unused. b. From their original production point, farmers transfer 40 million acres of land from corn to wheat production. They now produce 3.158 billion bushels of wheat and 10.107 bushels of corn. c. Farmers reduce their production of wheat to 2 billion bushels and increase their production of corn to 12.044 billion bushels. Along the production possibility frontier, the opportunity cost of going from 11.807 billion bushels of corn to 12.044 billion bushels of corn is 0.666 bushel of wheat per bushel of corn.

Step by step solution

01

Understand the given information

This problem tells us that in total, there are 124 million acres of land used for wheat or corn farming. Farmers used 50 million acres for 2.158 billion bushels wheat and 74 million acres for 11.807 billion bushels corn. The opportunity cost of producing 1 additional bushel of wheat is 1.7 fewer bushels of corn. Because of increasing opportunity costs, additional bushels of wheat have an opportunity cost greater than 1.7 bushels of corn.

02

Analyze production point (a)

In this scenario, farmers use 40 million acres to produce 1.8 billion bushels of wheat and 60 million acres to produce 9 billion bushels of corn. This leaves 24 million acres unused. Since the total acreage available for use is 124 million acres and only 100 million acres are being used, this point is feasible as there is still land available that hasn't been used. However, since they are not using all available land resources, it is not efficient in production. Answer: (ii) Feasible but not efficient in production.

03

Analyze production point (b)

From the original production point, farmers transfer 40 million acres from corn to wheat, which means they have now 90 million acres for wheat and 34 million acres for corn. They now produce 3.158 billion bushels of wheat and 10.107 bushels of corn. Since there is no information about total acreage being altered, and since the opportunity cost of producing 1 additional bushel of wheat is increasing, we cannot determine the feasibility of this point without more information. Answer: (iv) Unclear as to whether or not it is feasible.

04

Analyze production point (c)

In this situation, farmers reduce their production of wheat to 2 billion bushels and increase their production of corn to 12.044 billion bushels. Along the production possibility frontier, the opportunity cost of going from 11.807 billion bushels of corn to 12.044 billion bushels of corn is 0.666 bushel of wheat per bushel of corn. Here, we can see that the opportunity cost of producing an additional bushel of corn is less than the initial opportunity cost mentioned in the problem (1.7). Since the problem states that opportunity costs are increasing, this situation is not feasible. Answer: (iii) Not feasible.

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!