Acquire the most profit per unit

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Reference no: EM136955

Q1. A farmer determined a natural gas preserve on his property. He can extract the natural gas for a profit of $40 per unit now, $55 per unit in one year, $57 per unit in two years, and $60 in three years. The present market rate of interest is 6 %. At what time should the farmer remove the natural gas to acquire the most profit per unit in present value terms?

Q2. Is Jill Johnson incorrect or correct as soon as she says the following: "as I am preparing 20,000 pizzas / month, the total cost of pizzas is $75,000? If I produce 20,001 pizzas, my total cost will rise to $75,003. While I prepare 20,002 pizzas, my total cost rises to $75,005 pizzas." Preparing pizzas price should be increased." With a marginal cost graph show your answer.

Reference no: EM136955

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