Kulap, a Soybean Farmer, Acts to Prevent Crop Failure

Multiple Choice

Kulap, a soybean farmer, acts to prevent crop failure. The marginal benefit is represented by MB = 80 - A, where A is the number of precautions. The marginal cost of these precautions (e.g., soil preparation and pesticide and fertilizer use) is MC = 20 - 0.5A. Suppose the government offers Kulap crop insurance, which changes the marginal benefit of taking precautions to MB = 65 - 2A. The number of precautions Kulap takes _____ from _____ without insurance to _____ with insurance.

A) falls; 20; 3
B) falls; 40; 20
C) falls; 120; 30
D) rise; 60; 120