A strawberry farmer owns a farm named BLB. To keep costs manageable so she can provide affordable produce, and to achieve enough returns to pay land rent and earn a living for her own family, she operates a total of 20 acres at two nearby locations for total farm-gate revenue (this is price times quantity using the price of berries received by the farm) of $500,000 per year. **BLB sells half its crop directly to consumers at its own retail store at the farms. In order to be open 80 hours per week, 40 weeks per year at two locations, BLB has four full time retail employees, who cost $50,000 per year each including wages and all benefits (retirement, health care, paid sick leave, and two weeks of paid vacation time per year). The retail store rent, maintenance, utilities, and other retailing costs add $50,000 total. BLB plans to sell half the crop quantity through this marketing arrangement. 1a). How much is the total retail cost not counting berries? 1b). How much is the implicit cost of the berries (the amount the retail store ‘pays” the farm for berries to be sold at the retail establishment)? 1c). How much is BLB retail revenue requires to break even (zero net return) on retailing? 2. The local retail price of strawberries sold by other retailers (grocery stores and big fruit stands) is double the farm price. Because BLB is just one small farm, the demand elasticity facing her farm is -1000. The retailing business also uses considerable time management attention, which takes the farmers time away from farming, which is her true passion. She likes farming and does not much like being a retailer. Consider the dilemma in trying to retail her own crop. 2a). Is retailing profitable for BLB?
A strawberry farmer owns a farm named BLB. To keep costs manageable so she can provide affordable produce, and to achieve enough returns to pay land rent and earn a living for her own family, she operates a total of 20 acres at two nearby locations for total farm-gate revenue (this is price times quantity using the price of berries received by the farm) of $500,000 per year.
**BLB sells half its crop directly to consumers at its own retail store at the farms. In order to be open 80 hours per week, 40 weeks per year at two locations, BLB has four full time retail employees, who cost $50,000 per year each including wages and all benefits (retirement, health care, paid sick leave, and two weeks of paid vacation time per year). The retail store rent, maintenance, utilities, and other retailing costs add $50,000 total. BLB plans to sell half the crop quantity through this marketing arrangement.
1a). How much is the total retail cost not counting berries?
1b). How much is the implicit cost of the berries (the amount the retail store ‘pays” the farm for berries to be sold at the retail establishment)?
1c). How much is BLB retail revenue requires to break even (zero net return) on retailing?
2. The local retail price of strawberries sold by other retailers (grocery stores and big fruit stands) is double the farm price. Because BLB is just one small farm, the demand elasticity facing her farm is -1000. The retailing business also uses considerable time management attention, which takes the farmers time away from farming, which is her true passion. She likes farming and does not much like being a retailer. Consider the dilemma in trying to retail her own crop.
2a). Is retailing profitable for BLB?
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