Question

Suppose you are a manager of a dairy farm. You are currently
milking 100 cows and each cow produces 22,000 pounds (220 cwt) of
milk per year. To produce this quantity of milk, the farm milks the
each cow twice a day (once in the morning and once in the
afternoon). Now suppose milk prices are increasing. Over the past
few months the price of milk has increased and milk is now selling
for $15/cwt. The increase in milk price has got you thinking –
should I increase my milking times from twice a day to three times
a day (adding another milking time in the evening). If you do
increase milking times to three times a day, your VT dairy
extension specialist estimates your milk production per cow will
increase to 26,000 pounds of milk per year (260 cwt per cow per
year). Of course you will need more labor to get this extra milk.
Each milking requires 2 people to work 5 hours each. You must pay
each worker $10.00/hr during the week and time and a half during
the weekends ($15.00/hour). You will need to feed your cows some
extra feed since they will be producing more milk. The extension
specialist estimates you will need to feed each cow an additional 4
pounds of soybean corn meal mix per cow per day in the milking
parlor. Soybean/corn feed sells for $250/ton at the local coop.
Operating the milking equipment and parlor an additional 5
hours/day will also cost you an additional $1,000 in electricity
per year. Finally, since your cows will be working harder and will
be stressed more, you also expect you vet bills go up about $5,000
per year.

Should the farm add the third milking?

Yes |

No |

Question 25

Which of the following statements is true?

A) For a perfectly competitive firm, average fixed cost is constant
at all levels of output.

B) In the short run, at least one input is fixed.

C) If marginal product is positive but decreasing, marginal cost
will be declining.

Statement A is true |

Statement B is true |

Statement C is true |

Statements A and B are both true |

Statements B and C are both true |

Statements A and C are both true |

All of the above are true |

Answer #1

Suppose you are a manager of a dairy farm. You are currently
milking 100 cows and each cow produces 22,000 pounds (220 cwt) of
milk per year. To produce this quantity of milk, the farm milks the
each cow twice a day (once in the morning and once in the
afternoon). Now suppose milk prices are increasing. Over the past
few months the price of milk has increased and milk is now selling
for $15/cwt. The increase in milk price...

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Case Study #1: Planning a Healthy Vegetarian
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Name: ________________________________ Please - put your name in
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