What effect might new technology have on production?
A farmer purchases a new type of seed corn that will reduce her need for pesticides by two-thirds. The new seed is only slightly more expensive than the type she has planted in the past.
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The new type of seeds are better for the farmer as the requirement for pesticides is reduced by two-thirds. And the cost of the seeds is not slightly more than what is being used by the farmer right now.
The new technology will benefit the farmer. The cost of pesticides can be substantial for a farmer. As the farmer only spends one third the amount that is being spent on pesticide right now, it is a large saving. The cost incurred in adopting the new technology is very small as the new type of seeds are more expensive than those being used right now by a very small amount.
(The assumption made here is that there is no loss in the yield when the seeds in use right now are replaced by those created using the new technology.)
In the case provided, the new technology would be beneficial to the farmer. This is because the new seeds which have a higher pest resistance would reduce the costs associated with pesticide purchase and application. Further, the new seeds would also reduce the risk of losses attributed to pest attacks on the farm. It is quite normal for pests to destroy a portion of crops before the destruction is noticed and contained. Losses attributed to such destruction would thus be avoided by use of the new seeds.
The farmer would be advised to purchase the new seeds in spite of the slight price difference because that extra cost would serve as insurance against the risk posed by pests.
The answer assumes there is no yield difference between the two types of seeds, and the price difference does not exceed the cost of pesticides.
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