Comparing and Contrasting Assume that Alberto Ortiz owns 1,000 acres of farmland. If he plants 100% of his acreage in coffee, he will realize $15,000 at $15 per acre. If he diversifies, planting 600 acres in coffee, 200 acres in sugarcane, and 200 acres in soybeans, he will realize $11,600, as shown on the circle chart.
Now assume that, the following year, the price of coffee drops 40%, the price of sugarcane stays even, and the price of soybeans rises 50%. Calculate the difference in Ortiz’s earnings, depending on whether he devotes all his land to coffee or whether he diversifies, planting the three crops in the proportions shown in the chart. Compare and contrast Ortega’s shortfall in these two situations.

Coffee ($15 per acre) Sugarcane ($7 per acre) Soybeans ($6 per acre)