| Question |
The town where Beth’s Lawn Mowing Service is located is subject to sporadic droughts and monsoons. During periods of drought, the price for mowing lawns drops to $15 per acre, whereas during monsoons, it rises to $25 per acre. a. How will Beth react to these changing prices? b. Suppose that weeks of drought and weeks of monsoons each occur half the time during a summer. What will Beth’s average weekly profit be? c. Suppose Beth’s kindly (but still greedy) father offers to eliminate the uncertainty in Beth’s profits by agreeing to trade her the weekly profits based on a stable price of $20 per acre in exchange for the profits Beth actually makes. Should she take the deal? d. Graph your results and explain them intuitively. |
