A farmer produces tomatoes and sells them in a local market. Fixed costs for the season are ₦150,000. Variable cost is ₦30 per kilogram of tomatoes produced. The market price is ₦50 per kilogram, but if the total supply exceeds 2.5 tonnes, the price falls by 10 % for each additional 0.5 tonne supplied (price reduction is calculated on the original ₦50 price).

(a) Calculate the profit (or loss) if the farmer produces 3 tonnes of tomatoes.
(b) Assuming the same price‑adjustment rule continues for higher supplies, determine the production level (in tonnes) that maximises the farmer's profit and state the corresponding profit.

Question

A farmer produces tomatoes and sells them in a local market. Fixed costs for the season are ₦150,000. Variable cost is ₦30 per kilogram of tomatoes produced. The market price is ₦50 per kilogram, but if the total supply exceeds 2.5 tonnes, the price falls by 10 % for each additional 0.5 tonne supplied (price reduction is calculated on the original ₦50 price).

(a) Calculate the profit (or loss) if the farmer produces 3 tonnes of tomatoes.
(b) Assuming the same price‑adjustment rule continues for higher supplies, determine the production level (in tonnes) that maximises the farmer's profit and state the corresponding profit.

Accepted Answer

(a) -₦105,000; (b) 2.5 t gives -₦100,000 profit (maximum)

Neco Model Questions Vol1 2021 Agricultural Science Question 50

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