A farmer produces maize with fixed costs of $\text{₦}150,000$ per season. The variable cost is $\text{₦}18,000$ per tonne and the expected yield is 10 tonnes. The market price is $\text{₦}45,000$ per tonne. The government offers a subsidy equal to 20% of the market price for each tonne sold, but the subsidy is paid only if the farmer's profit before subsidy exceeds $\text{₦}100,000$. The farmer is considering a new high‑yield variety that raises the expected yield by 25% but increases the variable cost by $\text{₦}5,000$ per tonne. Should the farmer adopt the new variety, assuming the market price remains unchanged and the subsidy condition is evaluated after adoption?

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Yes, the farmer should adopt the new variety because the profit after subsidy rises to ₦237,500, which is higher than the ₦210,000 profit with the current variety.

Neco 2018 Agricultural Science Question 2

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