Calculate the net benefits of acreage option

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Reference no: EM133253721

Assignment:

1. The US Department of Agriculture (USDA) established the Conservation Reserve Program to pay a yearly rental payment in exchange for farmers removing environmentally sensitive land from agricultural production. Economists in the USDA measured the total benefits of keeping the land in each farm idle as 6200L - 5 L³ where L is the acres of idle land in each farm. The total cost of funding the program per farm is 200L.

a. The WSDA is thinking of funding either 5, 15, 30 or 40 acres of idle land per farm. Calculate the net benefits of each acreage option. Among the four options, how many acres would WSDA fund?

b. Given your answer in (a), is this the acreage of land converted that maximize net benefits? Prove your answer.

c. Given your results in (a) and (b), what is a limitation of the benefit cost analysis tool?

Reference no: EM133253721

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