Product-Product Relationships You manage a ranch that produces two outputs: guided elk hunts and direct-marketed grass-fed...

  

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Product-Product Relationships You manage a ranch that produces two outputs: guided elk hunts and direct-marketed grass-fed beef. You have a limited amount of labor to split between these two outputs this year, so you must determine how much of each output to produce. The following table provides data about the production of each output as a function of average number of hours of labor that can be dedicated each day across the year. The price you receive per hunter-day in guided elk hunting is $1,000, and the price you receive per pound of saleable live beef is $3.00. Replicate the framework of this table, completing the blank cells with the appropriate values and then answer the questions that follow. Elk Hunt Enterprise (y1) Direct Grass-Fed Beef Enterprise (y2) Saleable Beef Labor Hunter Days (x in y1) (y1) MPP (x in y1) MVP Labor MPP MVP (thousand lbs) (x in y1) (x in y2) (y2) (x in y2) (x in y2) 0 0 0 0 1 35 1 23 2 62 2 39 3 83 3 52 4 99 4 61 5 112 5 68 6 124 6 72 7 132 7 74 8 137 8 75 A. Based on the data in your completed table, communicate whether the input exhibits decreasing marginal productivity for either of the outputs. Explain how you know. B. Suppose you have 8 hours of labor available to allocate between the production of elk hunts and your beef enterprise. Create a table using the above in which you identify the 9 different combinations of elk hunts and beef that could be produced using a total of 8 hours of labor daily. For each combination, report (i) the amount of labor allocated to each enterprise, (ii) then number of units of output produced by each, (iii) the marginal value product of labor in each, and (iv) the total value created by that combination. C. Based on the data generated in your table in B, graph the production possibilities or production transformation curve (PTC) for 8 hours of labor (note that you should graph the 9 different combinations of (y1, y2) and not (x to y1, x to y2)). Put elk hunts on the horizontal-axis and beef on the vertical-axis. Given that the price of both outputs is positive, would the profit- maximizing combination include only one output or some of both? Graph the isorevenue line for TR=$40,000 and then shift it to find the tangency point. Based on your graph of the PTC and 1 isorevenue line, what is the optimal combination of outputs? (The optimal hour mix is approximate. Use whole number hours.) Describe any consistency/inconsistency that you observe here relative to what you see in the table you created in B. D. If you could acquire another hour of labor each day beyond the 8 hours that you are granted in C above, what is the maximum that you would pay? How did you determine this? Based only on information that you have generated for A-C above, how much additional labor would you purchase and how would you use it if you could hire labor at $8,750 per hour per day for the year ($35/hour x 5 days/week x 50 weeks)? Create a single PDF document that provides cleanly formatted answers for all questions/direction presented in all sub-parts A-D. On the first page of your formatted PDF output, include the CSU Honor Pledge ("I have not given, received, or used any unauthorized assistance") with your name beneath it as a reminder of the value that you will have taken away from this exercise. Submit your formatted PDF file AND the Excel spreadsheet that you used to support your analysis via the Canvas Assignment tool by the date due. Note, your answers in the PDF file must stand on their own and completely answer each question. You will be including information derived from Excel. However, the Excel file will not be graded and need not be cleanly formatted. Your submission of the Excel file will allow me to inspect the logic that drove your analysis. You MAY find it easiest to develop all of your answers in Excel and create your PDF file directly from there (that is be my approach), though this is not required. There are MANY ways that you could reasonably accomplish this task... The only requirement is that your final PDF product is clear, concise, and complete. 2 Product-Product Relationships You manage a ranch that produces two outputs: guided elk hunts and direct-marketed grass-fed beef. You have a limited amount of labor to split between these two outputs this year, so you must determine how much of each output to produce. The following table provides data about the production of each output as a function of average number of hours of labor that can be dedicated each day across the year. The price you receive per hunter-day in guided elk hunting is $1,000, and the price you receive per pound of saleable live beef is $3.00. Replicate the framework of this table, completing the blank cells with the appropriate values and then answer the questions that follow. Elk Hunt Enterprise (y1) Direct Grass-Fed Beef Enterprise (y2) Saleable Beef Labor Hunter Days (x in y1) (y1) MPP (x in y1) MVP Labor MPP MVP (thousand lbs) (x in y1) (x in y2) (y2) (x in y2) (x in y2) 0 0 0 0 1 35 1 23 2 62 2 39 3 83 3 52 4 99 4 61 5 112 5 68 6 124 6 72 7 132 7 74 8 137 8 75 A. Based on the data in your completed table, communicate whether the input exhibits decreasing marginal productivity for either of the outputs. Explain how you know. B. Suppose you have 8 hours of labor available to allocate between the production of elk hunts and your beef enterprise. Create a table using the above in which you identify the 9 different combinations of elk hunts and beef that could be produced using a total of 8 hours of labor daily. For each combination, report (i) the amount of labor allocated to each enterprise, (ii) then number of units of output produced by each, (iii) the marginal value product of labor in each, and (iv) the total value created by that combination. C. Based on the data generated in your table in B, graph the production possibilities or production transformation curve (PTC) for 8 hours of labor (note that you should graph the 9 different combinations of (y1, y2) and not (x to y1, x to y2)). Put elk hunts on the horizontal-axis and beef on the vertical-axis. Given that the price of both outputs is positive, would the profit- maximizing combination include only one output or some of both? Graph the isorevenue line for TR=$40,000 and then shift it to find the tangency point. Based on your graph of the PTC and 1 isorevenue line, what is the optimal combination of outputs? (The optimal hour mix is approximate. Use whole number hours.) Describe any consistency/inconsistency that you observe here relative to what you see in the table you created in B. D. If you could acquire another hour of labor each day beyond the 8 hours that you are granted in C above, what is the maximum that you would pay? How did you determine this? Based only on information that you have generated for A-C above, how much additional labor would you purchase and how would you use it if you could hire labor at $8,750 per hour per day for the year ($35/hour x 5 days/week x 50 weeks)? Create a single PDF document that provides cleanly formatted answers for all questions/direction presented in all sub-parts A-D. On the first page of your formatted PDF output, include the CSU Honor Pledge ("I have not given, received, or used any unauthorized assistance") with your name beneath it as a reminder of the value that you will have taken away from this exercise. Submit your formatted PDF file AND the Excel spreadsheet that you used to support your analysis via the Canvas Assignment tool by the date due. Note, your answers in the PDF file must stand on their own and completely answer each question. You will be including information derived from Excel. However, the Excel file will not be graded and need not be cleanly formatted. Your submission of the Excel file will allow me to inspect the logic that drove your analysis. You MAY find it easiest to develop all of your answers in Excel and create your PDF file directly from there (that is be my approach), though this is not required. There are MANY ways that you could reasonably accomplish this task... The only requirement is that your final PDF product is clear, concise, and complete. 2

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