AGEC 325, Sprig 2005



Lab #3 Spring 2009-02-16

Problem 1: See excel file.

Problem 2: See excel file.

Problem 3: See excel file and below problem.

1. The spreadsheet template 3LAB.WK4 contains the values relating irrigation water use to corn yield for a Texas High Plains farm. Use this template to do the following:

a) In column C, calculate average physical product. In column D, calculate marginal physical products.

b) Use column E to calculate total value product, and column F to calculate marginal value product. Base your information on a corn price of $2.70 per bushel.

c) Two different water prices will be considered. In column G enter an input price (marginal input cost) of $3.75 per acre inch of water, and in column H enter an input price of $10 per acre inch of water.

d) Columns I, J, and K are provided to enter marginal revenue and to calculate marginal cost. Enter the output price of $2.70 per bushel in column I. Calculate marginal cost based on a water price of $3.75 per acre inch in column J and in column K, calculate marginal cost based on an input of $10 per acre inch.

2. Use the marginal value products to determine the optimal level water use for each water price.

What is the optimal use for water at a price of $3.75 per acre inch? _________________

What is the optimal use for water at a price of $10 per acre inch? ___________________

3. Use your calculated marginal costs to determine the optimal output level.

What is the optimal output level when water is at $3.75 per acre inch? _______________

What is the optimal output level when water is at $10 per acre inch? _________________

4. Develop 2 separate line graphs. The first graph should show a relationship of marginal value product to marginal input costs at $3.75 per acre inch and $10 per acre inch. The second graph should show a relationship between marginal revenue and marginal costs at both $3.75 per acre inch and $10 per acre inch

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