# You are in the business of producing potatoes. The current price of potatoes is \$20 per ton. You can

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?