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 2016.

a. The average variable cost per acre planted with wheat was $115 per acre. Assuming a yield of 44 bushels per acre, calculate the average variable cost per bushel of wheat.

b. The average price of wheat received by a farmer in 2016 was $4.89 per bushel. Do you think the average farm would have exited the industry in the short run? Explain.

c. With a yield of 44 bushels of wheat per acre, the average total cost per farm was $7.71 per bushel. The harvested acreage for wheat in the United States decreased from 48.8 million acres in 2013 to 43.9 million acres in 2016. Using the information on prices and costs here and in parts a and b, explain why this might have happened.

d. Using the above information, what do you think will happen to wheat production and prices after 2016?