Econs currently, farmer, demand, action, should

busprof

John Klement is a soybean farmer who harvests 125,000 bushels of soybeans annually. Klement’s fixed costs are $200,000 and his variable costs are $5 per bushel. Soybeans are currently priced at $5.35 per bushel. Based on his estimates, Klement sees soybean prices being relatively stable for the next two years, then increasing to $7.00 per bushel due to increased demand from Japan. What action should Klement take? Klement should:

A) cut his production by 50% for the next two years and then resume full production.
B) shut down for two years and then restart his business.
C) continue operating his business as usual.