Philo T. Farmsworth is a corn farmer with a 40-acre tract of land. Each acre can produce 100 bushels of corn. The cost of planting the full tract of corn is $20,000 and the cost of harvesting the corn is $10,000.
a. In May, the price of corn is $10 per bushel and Philo plants his crop. How much will he make if he plants all 40 acres and sells at this price?
b. By the time of the harvest, in September, the price of corn has fallen to $2 per bushel. How much will Philo make if he harvests the crop and sells at this price?
c. Alternatively, if Philo does not harvest the crop, what will be his loss? Should Philo harvest?