Brett has almond orchards, but he is sick of almonds and prefers to eat walnuts

Question

Brett has almond orchards, but he is sick of almonds and prefers to eat walnuts instead. The owner of the walnut orchard next door has offered to swap this year's crop with him. Assume he produces 1,015 tons of almonds and his neighbor produces 779 tons of walnuts. If the market price of almonds is $ 107 per ton and the market price of walnuts is $ 111 per ton:

a. Should he make the exchange? The market value of the almond crop is _____

b. Does it matter whether he prefers almonds or walnuts? Why or why not?

Explanation / Answer

a) The market value of almond = 1015 * 107 = 108605
The market value of walnuts = 779* 111 = 86,469

No he should not mke the exchange as almond value is more.

b) No his preference doesnot matter .It is the ,arket value of the crop and profit which is more important.


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