A villager estimates that if he picks his orange crop now, he will obtain 2000 boxes of apples, which he can sell at $5 per box. However, he thinks his crop will increase by 150 boxes of apples for each week he delays picking, but that the price will drop at a rate of $0.25 per box per week; in addition, he estimates approximately 30 boxes per week will spoil for each week he delays picking. When should he pick his crop to obtain the largest total cash return? How much will he receive for his crop at that time?

A villager estimates that if he picks his orange crop now, he will obtain 2000 boxes of apples, which he can sell at $5 per box. However, he thinks his crop will increase by 150 boxes of apples for each week he delays picking, but that the price will drop at a rate of $0.25 per box per week; in addition, he estimates approximately 30 boxes per week will spoil for each week he delays picking. When should he pick his crop to obtain the largest total cash return? How much will he receive for his crop at that time?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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