Homework Help: Microeconomics

Posted by Jessica on Tuesday, November 27, 2012 at 6:36pm.

The Burning Belly Taco Stand is considering buying some new special ovens. Each oven will cost $1,000, and will last for 2 years before it wears out. The ovens will be used to make the Taco Stands famous "Burning Ring of Fire" tacos, and will generate a value of marginal product of $600 for the first oven, $570 for the second oven, and $530 for the third oven.(Assume all revenues are earned at the end of the year.) If the interest rate is 10 percent, how many ovens will the Burning Belly Taco Stand buy? (hint: calculate the present value of the VMP (value of marginal product) of the first, second and third oven, and compared that with the purchase price of the oven)

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