You are a retired landowner whose Conservation Reserve Program (CRP) contract for 100 acres will expire next year. You can renew your contract for another ten years and receive a payment of $130 per acre each year, but you wonder if it would be more profitable to put it into hay production and have it custom farmed. Your expected yield if you grow hay is five tons per acre, and the long-run expected selling price is $100 per ton. Fertilizer costs of $160 per acre each year would be incurred if hay is produced. Other variable costs of production would be $30 per acre each year. You can hire a custom operator to harvest and store the hay crop for you for $30 per ton. If you take the land out of the CRP program, you will no longer have to spend $800 per year to control weeds, but you will give up the $130 per acre annual payment from the USDA. What would your overall net change in profit be if you implemented this change? a. $3,800 b. $5,800 c. $3,000 d. $47,000

You are a retired landowner whose Conservation Reserve Program (CRP) contract for 100 acres will expire next year. You can renew your contract for another ten years and receive a payment of $130 per acre each year, but you wonder if it would be more profitable to put it into hay production and have it custom farmed. Your expected yield if you grow hay is five tons per acre, and the long-run expected selling price is $100 per ton. Fertilizer costs of $160 per acre each year would be incurred if hay is produced. Other variable costs of production would be $30 per acre each year. You can hire a custom operator to harvest and store the hay crop for you for $30 per ton. If you take the land out of the CRP program, you will no longer have to spend $800 per year to control weeds, but you will give up the $130 per acre annual payment from the USDA. What would your overall net change in profit be if you implemented this change? a. $3,800 b. $5,800 c. $3,000 d. $47,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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