Please explain detailed steps to reach the correct answers. 38.4 (1) Old MacDona
ID: 1123134 • Letter: P
Question
Please explain detailed steps to reach the correct answers.
38.4 (1) Old MacDonald produces hay. He has a single employee, Jack. If Jack works for r hours he can produce r bales of hay. Each bale of hay sells for $1. The cost to Jack of working r hours is c(z)-/10. (a) What is the efficient number of bales of hay for Jack to cut? 5 . (b) If the most that Jack could earn elsewhere is zero, how much would MacDonald have to pay him to get him to work the efficient amount? 52/ 10 $2.50. (c) What is MacDonald's net profit? 5-2.50 = $2.50 (d) Suppose that Jack would receive $1 for passing out leaflets, an activity that involves no effort whatsoever. How much would he have to receive from MacDonald for producing the efficient number of bales of hay? $3.50 (e) Suppose now that the opportunity for passing out leaflets is no longer available, but that MacDonald decides to rent his hayfield out to Jack for a flat fee. How much would he rent it for? $2. 50 .Explanation / Answer
Answer a : Here Total revenue fromselling the hat =1x
Marginal revenue =1
Total cost of manufacturing the hat = x2/10
Marginal cost (MC) = x/5
Efficient number of hats produced
MR =MC
1 =x/5
x =5
Therefore, the efficient number of hats is 5.
Answer b : Total cost of jack has been = x2/10
Total cost of jack has been produced = x2/10 =25/10 = $2.5
Answer c : Profit = Total revenue - Total cost
Profit = 1*5 - (5)2/10
Profit =5 -2.5 =$2.5
Here, the profit of producing 5 hats is $2.5
Answer d :Total cost paid by mcdonald = $2.50 +$1.00 = $3.50
$1 is the cost paid by the leaf outlet company
Answer e : He take rent of atleast that amount from the jack which he recieves as profit from selling the 5 hats in the market. So, atleast he has take $2.50 rent from the jack for giving it space.