PS1_Essay[1] (sol)

PS1_Essay[1] (sol) - ECON 1001 Essay Problem Set 1 You own...

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ECON 1001 Essay Problem Set 1
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You own and manage your own fruit stand. You can grow your own apples to sell as shown in the following table, or you can buy apples at a price of $0.20 per pound for retailing. For every hour you work growing apples, you must pay someone $6 per hour to run the fruit stand. How much time will you spend growing apples?
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Hours worked Total Pounds of Apple 0 0 5 200 10 400 15 500 20 620 25 680 30 700 35 720 40 730
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To find the answer, you will need to apply the ‘Cost-Benefit’ Principle. To determine how many hours to work on growing apples, find the MARGINAL COST of each ‘5 Hour’ unit spent on growing apples. Then, find the MARGINAL BENEFIT of each ‘5 Hour’ unit. When the unit of work effort and output is perfectly divisible, we can simply use the rule MB = MC to find the optimal amount of hours to work on growing apples.
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When the unit of work effort and output is NOT perfectly divisible, it is more useful to consider a sequence of decisions:
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This note was uploaded on 10/02/2011 for the course ECON 1001 taught by Professor S.c during the Spring '10 term at HKU.

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PS1_Essay[1] (sol) - ECON 1001 Essay Problem Set 1 You own...

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