Recall that Farmer Brown is planning his annual planting, and he grows two crops: corn and wheat. He has 100 acres of land available, and will be able to devote 150 days of labor to his crops. An acre of wheat requires four days of labor to plant and cultivate while an acre of corn requires only one day. He has $1000 of capital that he spends on the start-up costs of planting and cultivating. It costs $10 an acre to plant and cultivate corn, while the corresponding costs for wheat are $20 an acre. He expects a revenue of $40 per acre for the corn, and $120 an acre for wheat, and would like to maximize his total expected revenue. Unfortunately, the loan offer Farmer Brown previously received was rescinded after the lender was shut down by the CFPB for violating disclosure requirements. However, Farmer Brown did manage to find $30 in a pocket of some old jeans, and would like to spend it all on additional land (from his neighbor at $20/acre), or on labor (at $25/hour), or to just add to the capital for planting costs. Which should he spend it on to achieve the greatest increase in expected revenue, and what would the new optimal revenue be?
Recall that Farmer Brown is planning his annual planting, and he grows two crops: corn and wheat. He has 100 acres of land available, and will be able to devote 150 days of labor to his crops. An acre of wheat requires four days of labor to plant and cultivate while an acre of corn requires only one day. He has $1000 of capital that he spends on the start-up costs of planting and cultivating. It costs $10 an acre to plant and cultivate corn, while the corresponding costs for wheat are $20 an acre. He expects a revenue of $40 per acre for the corn, and $120 an acre for wheat, and would like to maximize his total expected revenue.
Unfortunately, the loan offer Farmer Brown previously received was rescinded after the lender was shut down by the CFPB for violating disclosure requirements. However, Farmer Brown did manage to find $30 in a pocket of some old jeans, and would like to spend it all on additional land (from his neighbor at $20/acre), or on labor (at $25/hour), or to just add to the capital for planting costs. Which should he spend it on to achieve the greatest increase in expected revenue, and what would the new optimal revenue be?
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