You are in the business of producing potatoes. The current price of potatoes is $20 per ton. You can hire workers to work your farm. Each one costs $15, and you must hire them in increments of one. Adding workers results in the following production schedule:
Number of Workers ||Total Output, Tons of Potatoes per Year
0 0
1 1.0
2 1.9
3 2.7
4 3.5
5 4.3
6 5.1
7 5.8
8 6.5
9 7.2
10 7.9
Given the above information please fill out the following table:
Number of Workers Total Revenue Marginal Revenue Total Labor Costs Marginal Labor Costs
0
1
2
3
4
5
6
7
8
9
10
How much should the farm produce?
How much profit do you make when this is the case?
You made an upfront investment of $100 to set up your farm. The profits provided above reflect annual profits. Now suppose that 20% of the time, after making your labor investment, you lose your crop. A risk free investment of that same $100 would have guaranteed an annual return of $6. Between these two investments, did you make the correct investment decision? Explain?