Tom lives on an island and has 20 coconut trees in the current period, which currently produce 180 coconuts. Tom detests coconuts, but he can trade them with people on other neighboring islands for things that he wants. Further, Tom can borrow and lend coconuts with neighboring islands. In the coconut credit market, a loan of 1 coconut in the current period is repaid with 2 cocnuts in the future period. Each period, Tom's trees produce, and then 10% of them die. If Tom plants a coconut in the ground in the current period, it will grow into a productive coconut tree in the future period. At the end of the future period, Tom can sell any remaining coconut trees for 1 coconut each. When Tom plants coconuts in the current period, he plants them in successively less fertile ground, and the less fertile the ground, the less productive is the coconut tree. For convenience, we assume here that fractions of coconuts can be produced by trees. Output in the future period, for given numbers of trees in production in the future period, is given in the following table: Future Trees Future Output 15 155.0 16 162.0 17 168.0 18 173.0 19 177.0 T 20 180.0 21 182.0 22 183.8 23 184.8 24 185.2 25 185.4 Plot the level of output against the quantitiy of capital for the future period! Plot the marginal product of capital against the quantity of capital for the future period. What is the marginal product of capital MP'_K for the 20th tree? GE
Tom lives on an island and has 20 coconut trees in the current period, which currently produce 180 coconuts. Tom detests coconuts, but he can trade them with people on other neighboring islands for things that he wants. Further, Tom can borrow and lend coconuts with neighboring islands. In the coconut credit market, a loan of 1 coconut in the current period is repaid with 2 cocnuts in the future period. Each period, Tom's trees produce, and then 10% of them die. If Tom plants a coconut in the ground in the current period, it will grow into a productive coconut tree in the future period. At the end of the future period, Tom can sell any remaining coconut trees for 1 coconut each. When Tom plants coconuts in the current period, he plants them in successively less fertile ground, and the less fertile the ground, the less productive is the coconut tree. For convenience, we assume here that fractions of coconuts can be produced by trees. Output in the future period, for given numbers of trees in production in the future period, is given in the following table: Future Trees Future Output 15 155.0 16 162.0 17 168.0 18 173.0 19 177.0 T 20 180.0 21 182.0 22 183.8 23 184.8 24 185.2 25 185.4 Plot the level of output against the quantitiy of capital for the future period! Plot the marginal product of capital against the quantity of capital for the future period. What is the marginal product of capital MP'_K for the 20th tree? GE
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Tom lives on an island and has 20 coconut trees in the current period, which currently produce 180 coconuts. Tom detests coconuts, but he can trade them with people on other
neighboring islands for things that he wants. Further, Tom can borrow and lend coconuts with neighboring islands. In the coconut credit market, a loan of 1 coconut in the current
period is repaid with 2 cocnuts in the future period. Each period, Tom's trees produce, and then 10% of them die.
If Tom plants a coconut in the ground in the current period, it will grow into a productive coconut tree in the future period. At the end of the future period, Tom can sell any remaining
coconut trees for 1 coconut each. When Tom plants coconuts in the current period, he plants them in successively less fertile ground, and the less fertile the ground, the less
productive is the coconut tree.
For convenience, we assume here that fractions of coconuts can be produced by trees. Output in the future period, for given numbers of trees in production in the future period, is
given in the following table:
Future Trees
15
16
17
18
19
20
21
22
23
24
25
Future Output
155.0
162.0
168.0
173.0
177.0
180.0
182.0
183.8
184.8
185.2
185.4
Plot the level of output against the quantity of capital for the future period!
Plot the marginal product of capital against the quantity of capital for the future period.
What is the marginal product of capital MP'_K for the 20th tree?
GE
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