Department of Natural Resource Economics
College of Agricultural and Marine Sciences
Sultan Qaboos University
INTRODUCTION TO AGRICULTURAL ECONOMICS (CAMS 2003)
Homework 3: Cost Theory
Learning Objective: This homework will enable you to understand, Producer Behavior Theory (decision making principles of producers), based on Cost Theory and the derivation of a producer’s supply function.
Please contact MS. Amani Al Alawi for clarifications on the homework.
- The figure given below depicts cost functions of a farm producing onions. Use the information in the figure to answer the following questions.
- If the price of Onion was 10 OR/Unit, what would be the quantity of onions supplied by the farm?
- Estimate the following for the production quantity that would be supplied when the price of Onion is 10 OR/Unit.
- Average Variable Cost (AVC)
- Total Variable Cost (TVC)
- At what price of onion will the farm “close down”?
- At what output of onion will the farm “close down”?
- Estimate the following at the “closing down” output of the farm.
- Average Variable Cost (AVC)
- Total Variable Cost (TVC)
- Define the supply curve of a firm in relation to the cost curves.
- Consider Total Cost (TC) as composed of Total Fixed Cost (TFC) and Total Variable Cost (TVC) and write formula for the following.
- Use the above formula and fill in the missing cells in the following table 2.2.
Table 2.2. Cost data on tomato production using the variable input fertilizer.
X |
Y |
Price X |
TFC |
TVC |
TC |
MC |
ATC |
AVC |
AFC |
2 |
40 |
5 |
110 |
|
|
|
|
|
|
|
65 |
|
|
|
|
0.4 |
|
|
|
|
80 |
|
|
|
|
|
|
0.375 |
|
|
90 |
|
|
|
150 |
|
|
|
|
|
Note: |
X is quantity of fertilizer (Units) |
|
|
Y is quantity of Tomato (Units) |
Price of X is the price of fertilizer (OR/ Unit) |
- Using the information calculated in table 2.2., estimate the profit (or loss) of production for price of Tomato as 0.40 (OR/Unit) in the Longrun and Shortrun.
Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"
Like this:
Like Loading...