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  3. suppose that we have an economy consisting of two

Suppose that we have an economy consisting of two farmers, Cornelius and Wheaton, who unsurprisingly...

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Accounting

Suppose that we have an economy consisting of two farmers, Cornelius and Wheaton, who unsurprisingly farm corn c and wheat w, respectively. Assume that both farmers produce their crop of choice using a single input, land , of which there are a total of = 100 acres, with c = 25 owned by Cornelius and w = 75 by Wheaton. However, neither is required to farm only his own land and each may rent a portion to the other, so that if Cornelius is farming c acres and Wheaton w, the quantities of each crop produced are given by the production functions qc = p c qw = p w Let pc and pw denote the prices of corn and wheat, respectively, and let r denote the rental price of land. (a) (5) Set up each farmers profit maximization problem, and find the first order conditions. (b) (5) Find the land demand functions for Cornelius d c (r, pc) and Wheaton d w(r, pw). (c) (5) Knowing that the supply of land is fixed, find the equilibrium rental price of land in terms of the prices of the crops that it can be used to grow r (pc, pw). (d) (5) Find the supply of corn q s c (pc, pw) and wheat q s w(pc, pw). (e) (5) Find the profits earned by Cornelius c(pc, pw) and Wheaton w(pc, pw)

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