As of September 2011, the average price of nitrogen fertilizer in the Philippines was 1280 pesos per 50kg sack. The average price of unmilled rice at the farmgate was 15.76 pesos per kg.
N rate fertilizer 1 fertilizer 2
0 3.447 3.633
60 4.982 3.954
90 5.636 3.377
120 5.461 2.561
150 5.486 2.485
180 4.879 2.096
a. Use these prices to calculate the marginal value product of fertilizer and its cost. You can do this somewhat crudely based on the table of numbers that you compiled above, or you can do something fancier using the equations that Excel fitted to the data.
b. What do you expect to be the profit-maximizing level of fertilizer that farmers would use on each of the two rice varieties, assuming that the same fertilizer responses found in the data would still apply today? Explain.
c. How do these levels compare to the yield-maximizing levels that you found in Question 3(b)? How would you explain the difference?
d. What level of profits would you expect farmers to earn on rice production using each of these varieties?
e. Which variety would be more profitable to a farmer facing these prices?