If a corn farmer yields 200 bushels per acre, total fixed costs are $150 per acre and total variable costs are $250 per acre, what is the total cost per bushel?

If a corn farmer yields 200 bushels per acre, total fixed costs are $150 per acre and total variable costs are $250 per acre, what is the total cost per bushel?

• A. $1.50
• B. $2.00
• C. $2.50
• D. $4.00

Answer: (B)

This question tests how to spread all costs over the quantity produced to get a cost per unit (average total cost). Add up the costs per acre: fixed plus variable equals 150 + 250 = 400 dollars per acre. With a yield of 200 bushels per acre, the cost per bushel is 400 divided by 200, which equals 2.00 dollars per bushel. You can also see this by breaking it into per-bushel components: fixed cost per bushel is 150/200 = 0.75 and variable cost per bushel is 250/200 = 1.25; sum is 2.00.

This question tests how to spread all costs over the quantity produced to get a cost per unit (average total cost). Add up the costs per acre: fixed plus variable equals 150 + 250 = 400 dollars per acre. With a yield of 200 bushels per acre, the cost per bushel is 400 divided by 200, which equals 2.00 dollars per bushel. You can also see this by breaking it into per-bushel components: fixed cost per bushel is 150/200 = 0.75 and variable cost per bushel is 250/200 = 1.25; sum is 2.00.