DEPARTMENT OF AGRICULTURAL ECONOMICS AND FARM MANAGEMENT

INSTITUTE OF EDUCATION
AEF 517: FARM MANAGEMENT AND ANALYSIS

Given the following information, Nitrogen is N20/kg and Hay is N4/kg. Determine the profit
maximizing nitrogen fertilizer level. 16mks

Nitroge Hay(kg MPP TVP MVP TIC MIC TR MR MC

n (kg) )
200 8,550 42.75 $342.00 $42.75 $120.00 $20.00 $342.00 $42.75 $20.00

250 9,375 44.10 $553.13 $44.13 $150.00 $10.00 $211.13 $21.13 $10.00

300 10,050 44.05 $902.25 $45.11 $180.00 $10.00 $349.13 $13.00 $10.00

350 10,575 42.50 $1,203.75 $43.28 $210.00 $10.00 $301.50 $5.68 $10.00

400 10,950 40.95 $1,476.00 $41.20 $240.00 $10.00 $272.25 $2.25 $10.00

450 11,175 38.85 $1,717.87 $38.04 $270.00 $10.00 $241.87 $1.62 $10.00

500 11,250 36.00 $1,800.00 $36.00 $300.00 $10.00 $82.13 -$8.00 $10.00

b. Advise the farmer which point he should record maximum profit. 4mks

Answer:

To find the profit maximizing nitrogen fertilizer level, we need to look at the point where MR = MC,
which is where marginal revenue equals marginal cost.

From the table above, we can see that the point where MR = MC is at 300 kg of nitrogen. Therefore, the
profit maximizing nitrogen fertilizer level for the farmer is 300 kg.

The farmer should record the maximum profit at the point where MR = MC, which is also 300 kg of
nitrogen. At this point, the farmer's total revenue will be $349.13, and the total input cost will be
$180.00, resulting in a profit of $169.13.