In 2012 a Severe Drought Raised the Price of Corn

question 391

Multiple Choice

In 2012 a severe drought raised the price of corn. For a farmer in Canada who harvested a normal crop because the farm was not affected directly by the drought, the increase in the price of corn

• A) increases the farmer's producer surplus.
• B) decreases the farmer's producer surplus.
• C) does not affect the producer surplus because this change is a movement along the farmer's supply curve and not a shift of the farmer's supply curve.
• D) increases producer surplus only if the farmer's supply is completely inelastic.

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Definitions:

Break-Even Time

The period it takes for a business or project to generate enough revenue to cover its initial investment and start making a profit.

Cash Inflows

The movement of money into a business or account, typically from operating activities, financing, and investing.

Discount Rate

The interest rate used to discount future cash flows to their present values in various financial models.

Net Present Value

A calculation that evaluates an investment's profitability by discounting expected future cash flows to their present value and subtracting the initial investment.