Report for GreenHarvest Farms
1. Production, Cost, Revenue, and Productivity:
Production refers to the process of transforming inputs such as labor, land, and capital into outputs like
organic fruits and vegetables at GreenHarvest Farms. Cost represents the expenses incurred in
producing these goods, including fixed costs like land and equipment, and variable costs like labor and
seeds. Revenue is the income generated from selling the produce, while productivity measures the
efficiency of the production process in terms of output per unit of input. These factors are crucial for
GreenHarvest Farms' overall performance and profitability as they determine the company's ability to
meet market demand, control costs, maximize revenue, and enhance efficiency.
2. Short-Run Analysis:
- Average Cost (AC) for each level of production:
AC = TC/Q
AC at 100 tons = $30,000/100 = $300
AC at 200 tons = $55,000/200 = $275
AC at 300 tons = $80,000/300 = $266.67
AC at 400 tons = $110,000/400 = $275
AC at 500 tons = $140,000/500 = $280
- Marginal Cost (MC) for each level of production:
MC = Change in TC/Change in Q
MC at 100 tons = $25,000
MC at 200 tons = $25,000
MC at 300 tons = $25,000
MC at 400 tons = $30,000
MC at 500 tons = $30,000
- Average Revenue (AR) for each level of production:
AR = TR/Q
AR at 100 tons = $20,000/100 = $200
AR at 200 tons = $36,000/200 = $180
AR at 300 tons = $48,000/300 = $160
AR at 400 tons = $56,000/400 = $140
AR at 500 tons = $60,000/500 = $120
- Marginal Revenue (MR) for each level of production:
MR = Change in TR/Change in Q
MR at 100 tons = $16,000
MR at 200 tons = $19,000
MR at 300 tons = $12,000
MR at 400 tons = $8,000
MR at 500 tons = $4,000
- Profit or loss at each level of production:
Profit at 100 tons = TR - TC = $20,000 - $30,000 = -$10,000 (loss)
Profit at 200 tons = $36,000 - $55,000 = -$19,000 (loss)
Profit at 300 tons = $48,000 - $80,000 = -$32,000 (loss)
Profit at 400 tons = $56,000 - $110,000 = -$54,000 (loss)
Profit at 500 tons = $60,000 - $140,000 = -$80,000 (loss)
3. Economies or Diseconomies of Scale:
GreenHarvest Farms experiences diseconomies of scale as the Average Cost (AC) increases with the level
of production. This indicates that the company is facing higher costs per unit as it expands its operations,
leading to inefficiencies and reduced profitability.
4. Recommendations for Short-Run Profitability:
To improve short-run profitability, GreenHarvest Farms should consider reducing production levels to
minimize losses. By focusing on optimizing costs and increasing efficiency, the company can enhance its
overall performance and profitability. Additionally, exploring alternative production methods or
diversifying product offerings could help mitigate losses and drive growth in the long run.
In conclusion, analyzing the short-run data and understanding key economic concepts are essential for
GreenHarvest Farms to make informed decisions and optimize its production and cost structures. By
implementing strategic measures to address inefficiencies and enhance profitability, the company can
sustain its competitive edge in the agricultural industry and meet the growing demand for organic
produce.
Reference:
1. Shapiro, D., MacDonald, D., Greenlaw, S. A., Dodge, E., Gamez, C., Jauregui, Andres., Keenan, D.,
Moledina, A., Richardson, C., & Sonenshine, R. (2023). Principles of microeconomics (3rd ed.).
OpenStax. Licensed under CC 2.0. (chapter 7)
