Clem Oatley could grow wheat and barley. He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on an acre of his land. The price of wheat is $2.00 per bushel and the price of barley $ 0.80. Show the benefits to Clem from specialization. What should he specialize in?
both
To determine the benefits of specialization for Clem Oatley, we need to compare the revenues he would generate from growing wheat and barley respectively.
The revenue from growing wheat can be calculated by multiplying the number of bushels (75) by the price per bushel ($2.00), resulting in a revenue of 75 * $2.00 = $150.
The revenue from growing barley can be calculated by multiplying the number of bushels (125) by the price per bushel ($0.80), resulting in a revenue of 125 * $0.80 = $100.
Based on these calculations, the revenue from growing wheat is higher ($150) compared to growing barley ($100). Therefore, Clem Oatley should specialize in growing wheat as it would generate greater benefits for him.
To determine the benefits of specialization for Clem, we need to calculate the potential revenues for growing wheat and barley separately.
First, let's calculate the revenue from growing wheat:
75 bushels of wheat * $2.00 per bushel = $150
Next, let's calculate the revenue from growing barley:
125 bushels of barley * $0.80 per bushel = $100
Now, we can compare the revenues from growing wheat and barley. As we can see, by specializing in growing wheat, Clem can generate $150 in revenue per acre. On the other hand, specializing in barley would only yield $100 in revenue per acre.
Therefore, based on the potential revenues, Clem should specialize in growing wheat. By doing so, he can maximize his income and benefit from specialization.
It's important to note that this answer is based on the assumption that the costs of growing both crops are the same. If the costs differ significantly, it may affect the final decision.