Transcript Cost Principles and Linear Break

Think Break #9 (Review)
Steers Beef MP VMP
0
0
10
72 7.2
648
20
148 7.6
684
30
225 7.7
693
40
295 7.0
630
50
360 6.5
60
420 6.0
70
475 5.5
80
525 5.0
450
90
570 4.5
405
100
610 4.0
360
How many steers should you
stock if the expected selling
price is $90/cwt and steers
cost $495 each?
Hint: What’s the single input
optimality condition?
Think Break #9 Answer
Steers Beef MP VMP
0
0
10
72 7.2
648
20
148 7.6
684
30
225 7.7
693
40
295 7.0
630
50
360 6.5
585
60
420 6.0
540
70
475 5.5
495
80
525 5.0
450
90
570 4.5
405
100
610 4.0
360
How many steers should you
stock if the expected selling
price is $90/cwt and steers
cost $495 each?
Answer: 70 steers, since an
additional steer costs $495,
which equals the value of the
marginal product generated by
the added steer (rx = VMPx)