2. Comparing and Contrasting Assume that Alberto Ortiz owns 1,000 bora-lonia
acres of farmland. If he plants 100% of his acreage in coffee, he will
binom m
realize $15,000 at $15 per acre. If he diversifies, planting 600 acres
in coffee, 200 acres in sugarcane, and 200 acres in soybeans, he will
realize $11,600, as shown on the circle chart.
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Coffee ($15 per acre)
Sugarcane ($7 per acre)
Soybeans ($6 per acre)
Now assume that, the following year, the price of coffee drops 40%,
the price of sugarcane stays even, and the price of soybeans rises
50%. Calculate the difference in Ortiz's earnings, depending on
whether he devotes all his land to coffee or whether he diversifies,
planting the three crops in the proportions shown in the chart.
Compare and contrast Ortega's shortfall in these two situations.