Question

Farmer DJ knows that feeding a grain supplement to his cows will produce more milk according to the schedule given below.(Note: the number on the top is the total pounds of supplement used and the number on the bottom is the total pounds of milk produced. For example, one pound of supplement produces 5 pounds of milk, two pounds of supplement produces 8 pounds of milk, and so on.) otal pounds of supplement used 1 2 3 4 5 Total Pounds of Milk Produced 5 8「10 1 1 1 1 5 Ignoring all other issues, how many pounds of supplement should Farmer DJ feed his cows if the price of milk is $0.20 per pound and the price of grain supplement is $1.05 per pound? b.3 C. 4 d. 2 e.

Answer 1

Pound ofPrice of grain supplement supplement Total Total pounds of Price of milk used ($/pound) cost($) milk produced ($/pound) Total revenue Net (Loss)/gain 1.05 1.05 1.05 1.05 3.15 1.05 1.05 5.25 0.2 0.2 0.2 0.2 0.2 0.05 0.5 1.15 5 2.1 1.6 10 4.2 2.2 2.3 4 5 11.5 -2.95

Total cost is computed by multiplying pounds of grain used with cost per pound of grain.

Total revenue is computed by multiplying pounds of milk produced with the price per pound of milk.

Net loss is obtained by deducting total revenue with the total cost.

In all the five scenarios, there is net loss hence is advisable to not produce milk at all.

The answer is a. 0