Suppose that the weather forecast in Exercise 9 indicates a 10% chance that cold weather will reduce
Question:
Suppose that the weather forecast in Exercise 9 indicates a 10% chance that cold weather will reduce the citrus grower’s profit from $100,000 to $85,000 and a 10% chance that cold weather will reduce the profit to $75,000. Should the grower spend $5000 to protect the citrus fruit against the possible bad weather?
Exercise 9
A citrus grower anticipates a profit of $100,000 this year if the nightly temperatures remain mild. Unfortunately, the weather forecast indicates a 25% chance that the temperatures will drop below freezing during the next week. Such freezing weather will destroy 40% of the crop and reduce the profit to $60,000. However, the grower can protect the citrus fruit against the possible freezing (using smudge pots, electric fans, and so on) at a cost of $5000. Should the grower spend the $5000 and thereby reduce the profit to $95,000?
Step by Step Answer:
Calculus And Its Applications
ISBN: 9780134437774
14th Edition
Authors: Larry Goldstein, David Lay, David Schneider, Nakhle Asmar