Suppose a Dairy Farmer Is Considering the Purchase of an Additional

question 69

Multiple Choice

Suppose a dairy farmer is considering the purchase of an additional milking machine at a price of $4000.She expects the discounted MRP of the machine in Year 1 to be $1700,in Year 2 to be $1500 and in Year 3 to be $1200,after which the machine has no value.The farmer should

• A)be indifferent about the purchase because its present value is approximately equal to its purchase price.
• B)not buy the machine because its present value is $400 less than its purchase price.
• C)buy the machine because its marginal revenue is $400 more than its marginal cost.
• D)buy the machine because its present value is $400 more than its purchase price.
• E)not buy the machine because its marginal revenue is $400 less than its marginal cost.

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Definitions:

Extrinsic

Originating from or motivated by external factors outside of the individual's own self, often relating to rewards or outside recognition.

Willingness

The quality or state of being prepared to do something; readiness.

Rough-And-Tumble Play

Vigorous play that involves physical activities like running, chasing, and play-fighting, important for social and physical development.

United States

A country in North America consisting of 50 states and a federal district, known for its diverse geography and cultural influence globally.