Assignment
Special Topics on Agribusiness Management
TERM PAPER ASSIGNMENT
Student Name: Nguyen Thi Minh Chi - M 10122033
Instructor: Dr. Rebecca H. Chung
Due Date: 12rd April 2013
Department of Tropical Agriculture and International Cooperation
National Pingtung University of Science and Technology
Chapter 7
3. In Table 7-3, what would the profit-maximizing input level be if the input price was $0? Notice the TPP and MPP at this point. What would be true about TPP and MPP at this point?
Input Level | Nitrogen applied (lbs) | Total physical product (TTP) (bu) | Marginal physical product (MPP) | Marginal value product (MVP)=P1*MPP | Marginal value product (MIP)=P2 | 0 | 0 | 130 | | | | 1 | 25 | 148 | 18 | 63 | 0 | 2 | 50 | 162 | 14 | 49 | 0 | 3 | 75 | 170 | 8 | 28 | 0 | 4 | 100 | 177 | 7 | 24.5 | 0 | 5 | 125 | 180 | 3 | 10.5 | 0 | 6 | 150 | 182 | 2 | 7 | 0 | 7 | 175 | 183 | 1 | 3.5 | 0 | 8 | 200 | 183 | 0 | 0 | 0 | P1 | Corn Price =$ | 3.5 | | | | P2 | Nitrogen price= $ | 0 | | | |
Applying the MVP=MIC rule to find the profit- maximizing output.
With an input price of $0, MIC is $0, the optimum input is 8 (MVP is still above MIC but using 9 units of input violates the rule) which will produce 183 units of output. This is the maximum output possible given this production function, that is, TPP is maximum and MPP is the smallest it gets before going negative. Only at an input price of $0 can we be sure the profit maximizing point is where output is maximum.
4. How does the law of diminishing returns cause MC to increase?
The formula for MC can be expanded and rearranged into the following relationship:
MC=∆ total input cost∆ total physical product (MPP)=Input PriceMPP
(Input price is constant)
For a given input price, it is easy to see that MC is inversely related to MPP. If MPP is decreasing as the law of diminishing returns dictates, MC will be increasing.
6. Does the equal marginal principle apply to
TERM PAPER ASSIGNMENT
Student Name: Nguyen Thi Minh Chi - M 10122033
Instructor: Dr. Rebecca H. Chung
Due Date: 12rd April 2013
Department of Tropical Agriculture and International Cooperation
National Pingtung University of Science and Technology
Chapter 7
3. In Table 7-3, what would the profit-maximizing input level be if the input price was $0? Notice the TPP and MPP at this point. What would be true about TPP and MPP at this point?
Input Level | Nitrogen applied (lbs) | Total physical product (TTP) (bu) | Marginal physical product (MPP) | Marginal value product (MVP)=P1*MPP | Marginal value product (MIP)=P2 | 0 | 0 | 130 | | | | 1 | 25 | 148 | 18 | 63 | 0 | 2 | 50 | 162 | 14 | 49 | 0 | 3 | 75 | 170 | 8 | 28 | 0 | 4 | 100 | 177 | 7 | 24.5 | 0 | 5 | 125 | 180 | 3 | 10.5 | 0 | 6 | 150 | 182 | 2 | 7 | 0 | 7 | 175 | 183 | 1 | 3.5 | 0 | 8 | 200 | 183 | 0 | 0 | 0 | P1 | Corn Price =$ | 3.5 | | | | P2 | Nitrogen price= $ | 0 | | | |
Applying the MVP=MIC rule to find the profit- maximizing output.
With an input price of $0, MIC is $0, the optimum input is 8 (MVP is still above MIC but using 9 units of input violates the rule) which will produce 183 units of output. This is the maximum output possible given this production function, that is, TPP is maximum and MPP is the smallest it gets before going negative. Only at an input price of $0 can we be sure the profit maximizing point is where output is maximum.
4. How does the law of diminishing returns cause MC to increase?
The formula for MC can be expanded and rearranged into the following relationship:
MC=∆ total input cost∆ total physical product (MPP)=Input PriceMPP
(Input price is constant)
For a given input price, it is easy to see that MC is inversely related to MPP. If MPP is decreasing as the law of diminishing returns dictates, MC will be increasing.
6. Does the equal marginal principle apply to