Find the profit-maximizing choice

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Reference no: EM137957

Q. In class we discussed the idea that small farmers are sometimes price takers, i.e. the price of wheat are set in the global marketplace. Assume a small farm produces soybeans that sell at a market price of $6 a bushel. In addition, the farmer understands her cost structure for production; her total cost for producing "q" bushels is given by:

TC = .1q^2+ 2q + 100

a. Does this farm has increasing returns to scale, stable returns to scale, or else decreasing returns to scale? Explicate how you can tell.

b. Find the profit-maximizing choice of q for this miniature farm; also compute profits that will be earned at this choice of q.

c. Draw a graph illustrating this situation and labeling the choice of q.

Reference no: EM137957

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