Think Break 7

Think Break 7 - Think Break #7 Repeat the previous problem,...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Think Break #7 Repeat the previous problem, but now use a milk price of Milk $10/cwt M = 25.9 + 2.56G + 1.05H 0.00505G2 0.00109H2 0.00352GH Prices: Grain $3/cwt, Hay $1.50/cwt What are the profit maximizing inputs? Think Break #7: Answer = 0.1( 25.9 + 2.56G + 1.05H 0.00505G2 0.00109H2 0.00352GH) 0.03G 0.015H FOC's 0.1(2.56 0.0101G 0.00352H) 0.03 = 0 0.1(1.05 0.00218H 0.00352G) 0.015 = 0 2.56 0.0101G 0.00352H = 0.03/0.10 = 0.3 1.05 0.00218H 0.00352G = 0.015/0.10 = 0.15 Think Break #7: Answer Solve FOC1 for H 2.56 0.0101G 0.00352H = 0.3 0.00352H = 2.26 0.0101G H = (2.26 0.0101G)/0.00352 H = 642 2.87G Substitute into FOC2 and solve for G 1.05 0.00218H 0.00352G = 0.15 0.9 = 0.00218(642 2.87G) + 0.00352G 0.9 = 1.4 0.00626G + 0.00352G 0.5 = 0.00274G G = 0.5/0.00274 = 182.5 lbs/week Substitute into equation for H Think Break #7: Answer M = 25.9 + 2.56G + 1.05H 0.00505G2 0.00109H2 0.00352GH M = 25.9 + 2.56(182.5) + 1.05(118.2) 0.00505(182.5)2 0.00109(118.2)2 0.00352(182.5)(118.2) = 306 lbs/week H = 642 2.87G H = 642 2.87(182.5) H = 642 523.8 = 118.2 lbs/week ...
View Full Document

Ask a homework question - tutors are online