Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 16

Farmers are often heard to complain about the high costs of machinery, labor, and fertilizer, suggesting that these costs drive down their profits. Does it follow that if, for example, the price of fertilizer fell by 10 percent, farming (a highly competitive industry with low barriers to entry) would be more profitable? Explain.