1. An agribusiness firm may undertake three alternatives:

A. by cane sugar and manufacture various sugars and sweets, making a profit of $10million;

B. by wheat and produce bread, rolls, and pasties, making a profit of $15 million; or

C. by corn and produce Tex-Mex foods, making a profit of $12 million.

a. Which alternative should this agribusiness firm undertake? Why?

b. The opportunity cost associated with the three choices is $ _______ million.

2. The Stinson family owns a farm in Amarillo, Texas. Three alternatives for how to use the farm:

a. Growth wheat. Wheat yield would be 70 bushels per acre. The price of wheat is $ 3.50 /bu and production expenses are $ 140 /ac.

b. Growth barley. Barely yield would be 50 bushels per acre. The price of barely is $ 2.50 /bu and production expenses are $ 150 / ac.

c. Lease out the acres. The Stinson’s neighbour, Auld McDonald, will pay $ 80/ac for leasing, but the Stinson’s would still have expenses of $ 35/ac.