Currently, a Farmer Can Either Grow 40 Bushels of Wheat

question 4

Multiple Choice

Currently, a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre. If he were able to trade 70 bushels of corn for 30 bushels of wheat, would he be better off or worse off?

• A) worse off, because his opportunity cost of wheat would increase from 2.33 bushels of corn to 3 bushels of corn
• B) better off, because his opportunity cost of wheat would fall from 80 bushels to 50 bushels
• C) better off, because his opportunity cost of wheat would fall from 3 bushels of corn to 2.33 bushels
• D) worse off, because his opportunity cost of wheat would increase from 50 bushels of corn to 80 bushels of corn

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Definitions:

Status Quo Bias

The tendency to avoid making a decision.

Irrational Behavior

Actions or decisions that contradict logic or reasoning, often deviating from expected or standard behavior.

Overconfidence

A cognitive bias where an individual overestimates their own ability, knowledge, or control over events.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision, representing the benefits one misses out on when choosing one option over another.