Chapter 1 Problems

Chapter 1 Problems - Problems of Chapter 1 1. To earn extra...

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Problems of Chapter 1 1. To earn extra money in the summer, you grow tomatoes and sell them at the farmers’ market for 30 cents per pound. By adding compost to your garden, you can increase your yield as shown in the table below. If compost costs 50 cents per pound and your goal is to make as much money as possible, how many pounds of compost should you add? Pounds of compost Pounds of tomatoes 0 100 1 120 2 125 3 128 4 130 5 131 6 131.5 The benefit of adding a pound of compost is the extra revenue you’ll get from the extra tomatoes that result. The cost of adding a pound of compost is 50 cents. By adding the fourth pound of compost you’ll get 2 extra pounds of tomatoes, or 60 cents in extra revenue, which more than covers the 50-cent cost of the extra pound of compost. But adding the fifth pound of compost gives only 1 extra pound of tomatoes, so the corresponding revenue increase (30 cents) is less than the cost of the compost. You should add 4 pounds of compost and no more. 2. Tom is a mushroom farmer. He invests all his spare cash in additional mushrooms, which grow on otherwise useless land. The mushrooms double in weight during their first year, after which time they are harvested and sold at a constant price per pound. Tom’s friend Dick asks Tom for a loan of $ 200, which he promises to repay after 1 year. How much interest will Dick have to pay Tom in order for Tom to recover his opportunity cost of making the loan? If Tom kept the $200 and invested it in additional mushrooms, at the end of a year's time he would have an additional $400 worth of mushrooms to sell. Dick must therefore give Tom $200 in interest in order for Tom not to lose money on the loan. 3. Martha and Sarah have the same preferences and incomes. Martha arrived at the
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This note was uploaded on 09/29/2010 for the course BIO 325 taught by Professor Bernadette-holdener,g during the Fall '08 term at SUNY Stony Brook.

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Chapter 1 Problems - Problems of Chapter 1 1. To earn extra...

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