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Illinois is known for its production of soybeans setting a record in 2017 for the highest beans per acre and producing the most soybeans of any state in 2018 and 2019. Consider a single farmer and answer the following questions.
A.) In early November 2019 the price of beans per bushel was $9.31. Suppose the farmer wishes to sell at a higher price to make more profit. What prevents that? Briefly explain.
B.) In June 2016 the price of beans was $11.50 per bushel. In 2017 the US government instituted a trade war which caused soybean exports to China to fall dramatically and prices have now fallen below $10. Why would soybean prices fall as a result of this trade war?
C.) Why would you not expect this farmer to advertise to sell more soybeans? Briefly explain.
D.) Suppose a new type of soybean is created that increases the yields per acre by 10 percent. What would you expect to happen to the farmer's profit as a result? Briefly explain.
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