Neco 2017 Economics Question 45

A farmer cultivates maize and soybeans on 10 hectares each. Fixed costs are \( FC = 500{,}000 \) naira. Variable cost per hectare for maize is \( VC_{M}=80{,}000+10{,}000\times Y_{M} \) where \( Y_{M} \) is the expected yield (tonnes per hectare). For soybeans, \( VC_{S}=70{,}000+8{,}000\times Y_{S} \). Expected yields are \( Y_{M}=2.5 \) t/ha and \( Y_{S}=1.8 \) t/ha. Market prices are \( P_{M}=120{,}000 \) naira per tonne and \( P_{S}=150{,}000 \) naira per tonne. The government offers a subsidy of \( 20{,}000 \) naira per tonne of soybeans if total soybean production exceeds 15 tonnes. (a) Calculate the farmer's profit if the current allocation (10 ha each) is kept. (b) Calculate the profit if 2 hectares are transferred from soybeans to maize (i.e., 12 ha maize, 8 ha soybeans). (c) Based on the results, advise whether the farmer should adopt the subsidy plan (keep the original allocation) or re‑allocate land, and state the maximum profit achievable.