Question

In competitive markets, farmers adopt new technologies that will eventually reduce their revenue because

a. each farmer is a price taker.

b. farmers are short-sighted.

c. regulation requires the use of best practices.

d. consumers pressure farmers to lower prices.

Short answer

Option a;each farmer is a price taker as they charge price against the supplied grain. Applying advanced technology will lead to an increase in supply for which their gaining price will be reduced.

Step-by-step solution

Explanation for the correct answer a

In the competitive market, farmers are price takers because each farmer acquires aminimal part of the grain market. Also, the farmer takes price against the grain; ifnew technologies are used, then production and supply of the grains will be more, for which price will be reduced. As a result, farmers will eventually be less benefitted, and there is the possibility that they may leave farming.

Reason for incorrect option b

Farmers are not short-sighted because if it is true, then no loss will be faced further. The production and supply will be done in such a way so that the total revenue always remains enhanced. The short-sightedness of the farmer is a hypothetical situation, but in reality, no economic situation reflects such cases.

Reason for incorrect option c

Farmers only depend on the price for the production and supply of grains. Regulations are not relevant for adapting new technologies as farmers may suffer loss because of advanced regulation and technologies.

Reason for incorrect option d

Lowering the price depends upon various economic factors like income level, quantity demand, inflation, and deflation. However, the demand for grain does not vary more as fewer substitutes are available in the market. Thus, consumers have to purchase the product anyhow. They cannot pressurize the farmers directly to reduce prices as adopting new technologies will automatically reduce the price.