A farmer is producing where MC = MR. Say that half of the cost of producing wheat is the rental cost of land (a fixed cost) and half is the cost of labor and machines (a variable cost). If the average total cost of producing wheat is $8 and the price of wheat is $6, what would you advise the farmer to do? ("Grow something else" is not allowed. Also, you should assume that the farmer is producing what he is producing in an economically efficient manner.

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In the short run the farmer should still grow wheat because by producing he will lose ... View the full answer