The production of agricultural products like wheat is one of the few examples of a

Chapter 0, Problem 10

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The production of agricultural products like wheat is one of the few examples of a perfectly competitive industry. In this question, we analyze results from a study released by the U.S. Department of Agriculture about wheat production in the United States in 1998 and make some comparisons to wheat production in 2010. a. The average variable cost per acre planted with wheat was $107 per acre. Assuming a yield of 50 bushels per acre, calculate the average variable cost per bushel of wheat. b.The average price of wheat received by a farmer in 1998 was$2.65 per bushel. Do you think the average farm would haveexited the industry in the short run? Explain.c. With a yield of 50 bushels of wheat per acre, the averagetotal cost per farm was $3.80 per bushel. The harvestedacreage for rye (a type of wheat) in the United States fellfrom 418,000 acres in 1998 to 250,000 in 2010. Using theinformation on prices and costs here and in parts a and b,explain why this might have happened.d. Using the above information, do you think the prices ofwheat were higher or lower prior to 1998? Why?