Question

Max, a corn farmer, must choose whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, at harvest the value of his corn crop will increase from $75 to $100 per acre. Using marginal analysis, Max should add fertilizer only if the cost of fertilizer is below__________

Answer 1

Answer:

$25 per pound.

Explanation:

A marginal analysis is the examination of the costs and benefits of a marginal change in the production of goods.

A marginal is the amount added to the total by an additional unit of an activity or resource.

Economic decision rules are mostly defined in terms of marginals.

In simple words, is for getting the most value for the resources used.

In this case, if without the fertilizer the value of the harvest is $75, and with fertilizer the value is $100, so $100 - $75 = $25.

$25 is the value difference that Max can do, so the cost of the fertilizer muy be below $25 to obtain a benefit.