1. OK Wheat
Many farms graze cattle on wheat from fall until the end of February or beginning of March

2. OK Wheat First Hollow Stem Advisor at Mesonet.org on 2/18/15
Remove cattle from wheat when the first hollow stem appears on the wheat

3. OK Wheat Value of the wheat harvested
Many farms graze cattle on wheat from fall until the end of February or beginning of March
Value of the cattle weight gained from grazing

4. OK Wheat
Variable inputs: inputs which increase as you increase production
Variable costs: costs that rise as you increase production

5. OK Wheat Major variable inputs
Fertilizer (nitrogen, phosphorus, potassium)
Pesticides
Machinery expenses

6. OK Wheat
Fixed inputs: inputs which do not increase as you increase production
Fixed costs: costs that do not rise as you increase production
Are many fixed costs, like land, that are not specified

7. OK Watermelon Major variable inputs Disease control
Harvesting/Marketing
Other

8. OK Watermelon
Types of fixed costs are similar to wheat … many fixed costs not specified

9. 5.4. Costs, revenues, and profits Question 8
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre) NO
0.00 $ ?
Yes
23.00
10.00
25.00 $
20.00
30.50
30.00
33.00
40.00
35.00 $
50.00
36.00 $
60.00
36.20
Price of wheat 4
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs 50
$ / acre
Other variable costs 60

10. Wheat yield (bushels / acre)
5.4. Costs, revenues, and profits
Question 8
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 ?
$ (50)
Yes
23.00
10.00
25.00 $
20.00
30.50
30.00
33.00
40.00
35.00 $
50.00
36.00 $
60.00
36.20
Price of wheat 4
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs 50
$ / acre
Other variable costs 60

11. 5.4. Costs, revenues, and profits Question 8
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits
($ / acre) NO
0.00 $ $
$ (50.00)
Yes
23.00 $ $ $
$ (18.00)
10.00
25.00 $ $ $ $
$ (11.00)
20.00
30.50 $ $ $ $ $
30.00
33.00 $ $ $ $ $
40.00
35.00 $ $ $ $ $
50.00
36.00 $ $ $ $ $
60.00
36.20 $ $ $ $ $

12. 5.4. Costs, revenues, and profits Question 8
-50 or (50)
(8.b) If we don’t produce any wheat our profits will be $_______ per acre.
(8.c) If we produce wheat but don’t apply any nitrogen our profits will be $_______ per acre.
(18) 50
(8.d) The profit-maximizing level of nitrogen use is __________ lbs N per acre, producing _______ bushels of wheat per acre and providing profits of $_______ per acre. 36 29

13. Wheat yield (bushels / acre)
5.4. Costs, revenues, and profits
Question 9
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 $ ? $
Yes
23.00 $
10.00
25.00 $ $
20.00
30.50 $
30.00
33.00 $
40.00
35.00 $
50.00
36.00 $
$ (34.00)
60.00
36.20 $
Price of wheat
2.25
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs 50
$ / acre
Other variable costs 60

14. 5.4. Costs, revenues, and profits Question 9
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 $ $
$ (50.00)
Yes
23.00 $ $ $
$ (58.25)
10.00
25.00 $ $ $ $
$ (54.75)
20.00
30.50 $ $ $ $
$ (43.38)
30.00
33.00 $ $ $ $
$ (38.75)
40.00
35.00 $ $ $ $
$ (35.25)
50.00
36.00 $ $ $ $
$ (34.00)
60.00
36.20 $ $ $ $
$ (34.55)

15. 5.4. Costs, revenues, and profits Question 9
(50)
(9.b) If we don’t produce any wheat our profits will be $_______ per acre.
(9.c) If we produce wheat but don’t apply any nitrogen our profits will be $_______ per acre.
(58.25) 50
(9.d) The profit-maximizing level of nitrogen use is __________ lbs N per acre, producing _______ bushels of wheat per acre and providing profits of $_______ per acre. 36
(34.00)

16. Wheat yield (bushels / acre)
5.4. Costs, revenues, and profits
Question 10
Produce wheat?
Nitrogen
(lbs / acre)
Wheat yield (bushels / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 $ ? $
Yes
23.00 $
10.00
25.00 $ $
20.00
30.50 $
30.00
33.00 $
40.00
35.00 $
50.00
36.00 $
$ (52.00)
60.00
36.20 $
Price of wheat
1.75
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs 50
$ / acre
Other variable costs 60

17. 5.4. Costs, revenues, and profits Question 10
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 $ $
$ (50.00)
Yes
23.00 $ $ $
$ (69.75)
10.00
25.00 $ $ $ $
$ (67.25)
20.00
30.50 $ $ $ $
$ (58.63)
30.00
33.00 $ $ $ $
$ (55.25)
40.00
35.00 $ $ $ $
$ (52.75)
50.00
36.00 $ $ $
$ (52.00)
60.00
36.20 $ $ $ $
$ (52.65)

18. We should not produce any wheat!
5.4. Costs, revenues, and profits
Question 10
(50)
(10.b) If we don’t produce any wheat our profits will be $_______ per acre.
We should not produce any wheat!
(10.c) If we produce wheat but don’t apply any nitrogen our profits will be $_______ per acre.
(69.75) ?
(10.d) The profit-maximizing level of nitrogen use is __________ lbs N per acre, producing _______ bushels of wheat per acre and providing profits of $_______ per acre. ? ?

19. 5.4. Costs, revenues, and profits Question 11
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre) NO
0.00 $
$ 50,000.00
Yes
23.00 $
10.00
25.00 $ $
20.00
30.50 $ $
30.00
33.00 $ $
40.00
35.00 $ $
50.00
36.00 $ $
60.00
36.20 $ $
Price of wheat
4.00
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs
50,000
$ / acre
Other variable costs 60

20. Wheat yield (bushels / acre)
5.4. Costs, revenues, and profits
Question 11
Produce wheat?
Nitrogen
(lbs / acre)
Wheat yield (bushels / acre)
Total costs ($ / acre)
Revenues
($ / acre)
Profits NO
0.00
$ 50,000.00 $
$ (50,000.00)
Yes
23.00
$ 50,060.00 $
$ (49,968.00)
10.00
25.00
$ 50,061.00 $
$ (49,961.00)
20.00
30.50
$ 50,062.00 $
$ (49,940.00)
30.00
33.00
$ 50,063.00 $
$ (49,931.00)
40.00
35.00
$ 50,064.00 $
$ (49,924.00)
50.00
36.00
$ 50,065.00 $
$ (49,921.00)
60.00
36.20
$ 50,066.00 $
$ (49,921.20)
Price of wheat
4.00
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs
50,000
$ / acre
Other variable costs 60

21. 5.4. Costs, revenues, and profits Question 11
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 $
$ 50,000.00
$ (50,000.00)
Yes
23.00 $
$ 50,060.00 $
$ (49,968.00)
10.00
25.00 $ $
$ 50,061.00 $
$ (49,961.00)
20.00
30.50 $ $
$ 50,062.00 $
$ (49,940.00)
30.00
33.00 $ $
$ 50,063.00 $
$ (49,931.00)
40.00
35.00 $ $
$ 50,064.00 $
$ (49,924.00)
50.00
36.00 $ $
$ 50,065.00 $
$ (49,921.00)
60.00
36.20 $ $
$ 50,066.00 $
$ (49,921.20)
Price of wheat
4.00
$ / bushel
Price of nitrogen
0.1
$ / lb
Fixed costs
50,000
$ / acre
Other variable costs 60

22. 5.4. Costs, revenues, and profits Question 11
(50,000)
(11.b) If we don’t produce any wheat our profits will be $_______ per acre.
(11.c) If we produce wheat but don’t apply any nitrogen our profits will be $_______ per acre.
(49,968) 50
(11.d) The profit-maximizing level of nitrogen use is __________ lbs N per acre, producing _______ bushels of wheat per acre and providing profits of $_______ per acre. 36
(49,921)

23. 5.4. Costs, revenues, and profits Question 12
Produce wheat?
Nitrogen (lbs / acre)
Wheat yield (bushels / acre)
Cost of nitrogen application ($ / acre)
Total fixed costs ($ / acre)
Total variable costs ($ / acre)
Total costs ($ / acre)
Revenues ($ / acre)
Profits ($ / acre) NO
0.00 $ $
$ (10.00)
Yes
23.00 $ $ $
$ (9.50)
10.00
25.00 $ $
$ (12.50)
20.00
30.50 $ $ $
$ (3.25)
30.00
40.00 $ $ $ $
45.00 $ $ $ $
50.00
47.00 $ $ $
60.00
43.00 $ $ $ $
Price of wheat
3.50
$ / bushel
Price of nitrogen
1.0
$ / lb
Fixed costs 10
$ / acre
Other variable costs 80

24. 5.4. Costs, revenues, and profits Question 12
(10)
(11.b) If we don’t produce any wheat our profits will be $_______ per acre.
(11.c) If we produce wheat but don’t apply any nitrogen our profits will be $_______ per acre.
(9.5)
(11.d) The profit-maximizing level of nitrogen use is __________ lbs N per acre, producing _______ bushels of wheat per acre and providing profits of $_______ per acre. 40 45
27.5

25. 5.4. Costs, revenues, and profits
(14) To maximize profits, a farmer does not apply the amount of nitrogen that maximizes yield. Why?
Because that amount of nitrogen use causes fixed costs to rise.
Because if we apply that much nitrogen, the last few lbs of nitrogen costs more than the additional revenues they provide.
Because that much nitrogen would harm the crops and lower yield.
Because that would result in so much wheat being produced that the price of wheat would fall.
b, d

26. 5.4. Costs, revenues, and profits
(15) A farmer who applies however much nitrogen is needed to maximize yield is making the mistake of…
…not thinking about the impact each lb of nitrogen has on yield.
…not thinking about how higher yields reduce crop prices.
…not thinking about the cost of nitrogen.
…spending too little time thinking about how nitrogen use and fixed costs are correlated.
a , c

27. 5.4. Costs, revenues, and profits
(16) A farmer should increase the amount of nitrogen she applies per acre of wheat…
…whenever its marginal product is positive.
…until the marginal product equals zero.
…until the marginal product turns negative.
…until it equals one.
None of these.

28. 5.4. Costs, revenues, and profits
(17) Like a farmer applying nitrogen, a factory should increase labor hours so long as…
…the factory is operating in stage 2 of production.
…not thinking about how higher yields reduce crop prices.
…the marginal product of labor is positive.
…the value of the additional factory production is greater than the cost of the extra labor hours.
a , c

29. 5.4. Costs, revenues, and profits Question 13
Produce anything?
Total Labor Hours
Factory Production
Labor Costs
Revenues
Profits NO
$ (1,500,000)
Yes
0.00
100.00
10,000
$ ,000
1,000,000
$ (501,000)
200.00
13,000
$ ,000
1,300,000
$ (202,000)
300.00
16,000
$ ,000
1,600,000
$ ,000
400.00
17,000
$ ,000
1,700,000
$ ,000
500.00
17,500
$ ,000
1,750,000
$ ,000
600.00
17,600
$ ,000
1,760,000
$ ,000
700.00
17,650
$ ,000
1,765,000
$ ,000
800.00
$ ,000
$ ,000
900.00
16,800
$ ,000
1,680,000
$ ,000
16,500
$ ,000
1,650,000
$ ,000
Price factory receives for its product
100.00
$ / bushel
Hourly price / wage paid to workers
10.00
$ / lb
fixed costs
1,500,000
$ / acre
other variable costs
0.00