Tom is a mushroom farmer. He invests all his spare cash in additional mushrooms, which grow on

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Tom is a mushroom farmer. He invests all his spare cash in additional mush¬rooms, which grow on otherwise useless land behind his barn. The mushrooms double in weight during their first year, after which time they are harvested and sold at a constant price per pound. Tom's friend Dick asks Tom for a loan of $200, which he promises to repay after one year. How much interest will Dick have to pay Tom in order for Tom to recover his opportunity cost of making the loan? Explain briefly.
Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Principles of Economics

ISBN: 978-0073511405

5th edition

Authors: Robert Frank, Ben Bernanke

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