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Harman [31]
3 years ago
14

Smallville has a linear production possibility frontier in the production of good X and good Y. It can produce 6 of X per hour o

r 8 of Y per hour. Suppose it has 240 hours of labor and divides labor hours equally between production of good X and good Y. What is the MAXIMUM number of good Y it can produce in the time it has allocated to Y production?
Business
1 answer:
aliina [53]3 years ago
6 0

Answer:

The maximum amount of good Y produced will be 960.

Explanation:

Smallville has a linear production possibility frontier in the production of good X and good Y.

It can produce 6 of X per hour or 8 of Y per hour.  

It has 240 hours of labor and divides labor hours equally between the production of good X and good Y.

It means that both good X and good Y get 120 hours of labor each.  

The amount of good Y produced in 120 hours

= 120\ \times\ 8

= 960 units

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Formula:

        PV=C\times \bigg[\dfrac{1}{r}-\dfrac{1}{r(1+r)^t}\bigg]

Where:

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  • r is the monthly rate
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         PV=$\ 1,500\times \bigg[\dfrac{1}{(0.005\overline 6}-\dfrac{1}{0.005\overline 6(1+0.005\overline 6)^{(6\times12)}}\bigg]

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<u>2. Option B will pay $1,025 a month for 10 years. </u>

         PV=$\ 1,025\times \bigg[\dfrac{1}{(0.005\overline 6}-\dfrac{1}{0.005\overline 6(1+0.005\overline 6)^{(10\times12)}}\bigg]

         PV=\$ 89,068.22

<u>3. Option C offers $85,000 as a lump sum payment today. </u>

<u></u>

  • PV = $85,000
<h2 /><h2> Conclusion:</h2>

The present value of the<em> option B, $1,025 a month for 10 years</em>, has a the greatest present value, thus since he is only concerned with the <em>financial aspects of the offier</em>, this is the one he should select.

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