Answer to Question #152834 in Microeconomics for Muhammad yousuf

Question

The Wheeler Wheat Farm has a long-term lease on 5000 acres of land in New South Wales. The annual lease payment is $250,000. Prior to planting in the spring of 2021, the Wheeler Farm accountant predicted that the Farm would have $135,000 left after paying all of its costs except the annual lease payment. In this case, the Wheeler Wheat Farm should:

Answer 1

In this case, the Wheeler Wheat Farm should continue to operate even though it predicts an accounting loss of $115,000, because it can cover its variable costs and P > AVC (average variable costs).