No. of cows (head) 1. COSTS 1. Assume you have a fixed amount of pasture. The table below shows the relationship between the number of cows run on the pasture and the amount of beef produced. Complete the table using the following information: Total fixed costs $20,000, variable cost of $180 per.cow. and a beef price of $90.00 per cwt. 0 25 50 75 100 125 150 175 200 225 250 275 1. 2 Output (cut of beef) 0 104 220 322 413 494 568 629 676 710 730 737 Total Revenue Total Total Total Variable Fixed Cost Cost Cost Are you in the short run or long run with respect to the pasture? Ans For questions 1-3 assume you do not own the pasture but are only making a study to determine if you could make a profit if you should purchase it. Average Average Average Variable Fixed Total cost Costs Cost XXXX XXXX XXXXX 9-1 Marginal Marginal Cost Revenue Ans XXXXXXXXXX Total Profit What is the lowest beef price which would make purchasing the pasture and producing beef a breakeven deal? (i.e., the price would have to be higher than this value before you would have a profit.) 3. b) How many cows would you want at this price? 7. What would your profit or loss be? Ans. Ans. Assuming a $90.00 beef price as given, would you purchase the pasture to raise beef? WHY? For the remaining questions, assume you already own the pasture. 4. Are you in the short run or long run with respect to the pasture? Ans At the beef price of $90.00 what is the optimum number of cows and what would your profit or loss be at this number and price? Ans. Cows Ans Profit or loss 6. If the price of beef was $98.00 what is the optimum number of cows and the profit or loss at that number and price? Ans Cows Ans. Profit or loss If the price of beef was $60.00 what is the optimum number of cows and the profit or loss at that number and price? Ans. Cows Ans. Profit or loss 8. If the price of beef was $45.00 what is the optimum number of cows and the profit or loss at that number and price? Cows Profit or loss 10. 11. Ans Ans, At some point the price of beef could be so low that you would be better off with no cows and leaving the pasture idle. This would happen whenever the price of beef was below what value? Ans. The price of beef would have to be at least S Assume a beef price of $92.50 and an offer from a neighbor to rent your pasture for $25,000 per year. As a profit maximizer, what should you do? Rent out your pasture or raise beef? Carefully explain your reason(s). to make 225 the optimum number of cows.