The following is representative of "Michael The Dairy Farmer, Rancher, Pig Raiser's"...I can never keep it straight...Marginal Utility schedule: The price of Pigs is$10,000per hog and the price of Cows is$20,000a head. Michael has a budget of$90,000. Choose which of the following combinations makes the most sense if he's looking to maximize his income, then explain why: A. 7 Pigs and 1 Cow B. 5 Pigs and 2 Cows C. 3 Pigs and 3 Cows D. 1 Pig and 4 Cows
Question
The following is representative of "Michael The Dairy Farmer, Rancher, Pig Raiser's"...I can never keep it straight...Marginal Utility schedule: The price of Pigs is20,000a head. Michael has a budget of$90,000. Choose which of the following combinations makes the most sense if he's looking to maximize his income, then explain why: A. 7 Pigs and 1 Cow B. 5 Pigs and 2 Cows C. 3 Pigs and 3 Cows D. 1 Pig and 4 Cows
Solution
To determine which combination makes the most sense for Michael to maximize his income, we need to calculate the total revenue for each option and choose the one with the highest value.
Let's start by calculating the total revenue for option A, which is 7 Pigs and 1 Cow. The price of a pig is 10,000 = 20,000, so 1 cow would cost 70,000 + 90,000.
Next, let's calculate the total revenue for option B, which is 5 Pigs and 2 Cows. Following the same calculation, the cost for 5 pigs would be 5 * 50,000, and the cost for 2 cows would be 2 * 40,000. Thus, the total cost for option B is 40,000 = $90,000.
Moving on to option C, which is 3 Pigs and 3 Cows. The cost for 3 pigs would be 3 * 30,000, and the cost for 3 cows would be 3 * 60,000. Therefore, the total cost for option C is 60,000 = $90,000.
Lastly, let's calculate the total revenue for option D, which is 1 Pig and 4 Cows. The cost for 1 pig would be 20,000 = 10,000 + 90,000.
Now, let's compare the total revenues for each option. Since the budget is $90,000, the total revenue should ideally be higher than this amount to maximize income.
Option A has a total cost of 90,000 to maximize income.
Option B also has a total cost of 90,000 as well.
Option C also has a total cost of 90,000.
Option D has a total cost of 90,000.
Since all the options have the same total cost of $90,000, the choice that makes the most sense to maximize income would be the one with the highest revenue. However, without information about the selling prices of pigs and cows, we cannot determine which option would generate the highest revenue.
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