Suppose That the Fixed Costs for a Wheat Farm Are

question 17

Essay

Suppose that the fixed costs for a wheat farm are equal to $10, and variable costs are given in the chart:
$\begin{array}{cc} \underline {\mathrm{Y}=\text { wheat (mt) }}& \underline {\mathrm{TVC}(\$)}\\0 & 0 \\1 & 20 \\2 & 36 \\3 & 45 \\4 & 60 \\5 & 80 \\6 & 120\end{array}$ A. Explain what the fixed costs are for the wheat farm.
B. Explain what the variable costs are for the wheat farm.
C. Complete a chart that includes: Y, TC, TFC, TVC, ATC, AVC, and MC.
D. Are opportunity costs included in these costs?
E. Complete a graph of Y, TC, TFC, TVC, ATC, AVC, and MC.

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Definitions:

Plant Asset

Long-term tangible assets that are used in the operations of a business and are not intended for sale.

Book Value

The value of an asset as recorded on a company's balance sheet, calculated as the cost of an asset minus accumulated depreciation.

Double Declining-balance

An accelerated method of depreciation where an asset's book value is reduced at double the rate of its straight-line depreciation.

Accelerated Depreciation

A method of depreciation used for accounting or income tax purposes that allows higher deductions in the earlier years of the useful life of an asset.