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Soybeans versus Corn

Soybeans

Corn

Total Revenue:

$180

$140

Look at soybeans:

$140 opportunity cost

$40 more revenue per acre from soybeans

We have calculated the total revenue (expected price x expected yield) per acre for soybeans and corn. Let us arbitrarily choose to produce soybeans on this paper example. Once we choose soybeans to produce, the lost revenue from not choosing corn becomes our opportunity cost. By taking the difference between the total revenue from soybeans and the opportunity cost (lost revenue from corn), we determine that soybeans will produce $40 more revenue per acre than corn. Should we really choose to produce soybeans, or what?

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