A farming family owns some land. Suppose that in any year the equivalent of two people are needed to farm

each acre of land that they own. The following information is given to you: (i) There are six people in the

family; (ii) the going wage per person (which each person can earn is he or she chooses) is $1000; (iii) each

acre of land produces $3000 worth of output (if farmed properly by two people, as earlier stated); (iv) the

family is always free to lease out land, but the labor required to farm it must be compensated at $1100 per

person; (v) that family can always hire labor, but hired labor is useless without supervision, and to hire one

supervisor to monitor labor (irrespective of number of laborers that you hire), costs $2000 per year.

a) Calculate the rent per acre the family can hope to obtain by leasing out the land.

b) For a six-person family, what is the minimum acreage necessary for it to be optimal to lease out the

land? Explain your answer.

c) Is there a threshold acreage after which the family will no longer lease out the land, but hire a supervisor

and employ wage labor?